SARFAESI Act- Know what is SARFAESI Act, its importance and when it came into force

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As we all know that almost all Most of the questions in banking exams are asked from Banking Awareness i.e. recent events related to banking.In such a situation, it is important for the candidates to stay updated about the recent important banking events and answer the questions asked in the examination confidently. Understanding this point of the candidates, today the team of Adda247 has prepared for you another important topic for banking exams i.e. SARFAESI Act.

Today we will know – SARFAESI Act- Know what is SARFAESI Act, its importance and when it came into force. If you want to go to a Government Bank job, then it is very important that you have good knowledge about SARFAESI Act, its importance and when it came into force. Further in this article, all the important information i.e. basic facts about the major risks related to SARFAESI Act, its importance and when it came into force are being given.

SARFAESI Full Form

SARFAESI Full Form-

Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, which is SARFAESI Act Also known as, a The Act is a law that allows banks and financial institutions to recover their unpaid debts (Provides power to auction residential or commercial properties for recovery of unpaid loan. ARCIL, India's first Asset Reconstruction Company was established under this Act.

Why did SARFAESI Act come?

Narasimham Committee I and II and Andhyarujina Committee It was formed to examine banking sector reforms, recognizing the need for changes in the legal system with respect to these sectors. The committees suggested making new laws to empower banks and financial institutions to take possession of securities and sell them without any interference of the court. Under this Act, if the borrower of the financial institution or bank makes any default in the repayment of loan or any installment then his account will be classified as non-performing asset (NPA).

Objective of SARFAESI Act:

  • Banks and other financial institutions can recover their non-performing assets (NPAs) efficiently and timely.
  • If borrowers fail to repay their loans, banks and financial institutions may auction the borrower's assets to recover their unpaid loan amount or losses.

Role of SARFAESI Act:

  • Securitization of financial assets and issue of security receipts: Acquiring financial assets by issuing or entering into an agreement to issue debentures or bonds. To complete this and encash the security receipts issued to the QB.
  • Reconstruction of financial assets: In this it properly measures the management, sale, debt restructuring and disposal or taking over of the assets which are subject to the RBI guidelines.
  • Enforcement of Security Interest: Enforcement of security interest by secured creditors without the intervention of the court.

other tasks: It acts as an agent of banks or financial institutions for recovery of unpaid debts, acts as manager of secured assets appointed by the lender, even acts as a court-appointed receiver. .

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