Banks to display borrowers’ name whose assets taken into possession under SARFAESI Act
As a part of the move towards greater transparency, the Reserve Bank of India (RBI) has asked lenders, which are secured creditors as per the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI Act), 2002, to display information in respect of the borrowers whose secured assets have been taken into possession by the lenders under the Act.
All the banks and financial institutions, which are regulated by the RBI, will have to upload this information on their website in a prescribed format. The first such list will be displayed on the website of the regulated entity within six months from the date of the circular. The list will have to be updated on a monthly basis.
Format of the display
| Sl No | Branch Name | State | Borrower name | Guarantor (wherever applicable | Registered address of the Borrower | Registered address of the Guarantor (wherever applicable) | Outstanding amount (in Rs) | Asset classification | Date of asset classification | Details of security possessed | Name of the title holder of the security possessed |
What is SARFAESI Act?
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, also known as the SARFAESI Act, is a law in India that enables banks and other financial institutions to recover loans without the intervention of courts. It was enacted to expedite the recovery of loans and reduce the burden of non-performing assets (NPAs) on banks.
The SARFAESI Act applies to all secured loans, i.e., loans that are backed by collateral such as property, machinery, or inventory. It does not apply to unsecured loans, such as personal loans or credit card loans.
Under the SARFAESI Act, banks and financial institutions can take the following steps to recover loans:
- Issue a demand notice to the borrower: The lender must first issue a demand notice to the borrower, asking them to repay the loan within 60 days.
- Take possession of the secured asset: If the borrower fails to repay the loan within 60 days, the lender can take possession of the secured asset. This can be done through a process called symbolic possession, which involves taking physical control of the asset without actually evicting the borrower.
- Sell the secured asset:Â The lender can then sell the secured asset to recover the loan amount. The sale can be conducted through an auction or by private treaty.
Also See: Uncertain landscape for auction purchasers & asymmetric information under SARFAESI Act
