SARFAESI ACT 2002
When the banks and financial institutions indulge in their lending activities with or without securities, it improves its economic base and competes with the sister concerns. The element of recklessness crept into the system when prudential norms seldom followed, damaging its very existence in the rat race to earn profits and business.
The country’s laws are sufficient and efficient enough to protect the Banks and FI’s interests. Due to mushrooming number of trade and business activities flourishing, it was necessary for the speedy recovery of the dues of the Banks, as liquidity would be affected, ruining the very existence of the concerned financial institution.
And then there was a thought of empowering such Banks and FI’s to recover its dues on its machinery and mechanism, to prevent the excessive delays involved in court proceedings.
SARFAESI Act 2002 was a great boon to the Financial sector, enabling them to recover their dues through an in-house procedure and process.
Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Act is known as SARFAESI Act.
The act was just the answer to the long-pending lamentations from the lending institutions suffering from the time delays in court procedures. Especially when time is money, the days of delay precariously affects the lending institution.
Under SARFAESI ACT 2002, the banks got empowered to recover their loans without the court’s intervention.
However, some of the fiscal Acts provide for recoveries of the dues through their mechanism, as provided under the respective legislation, like the Revenue recovery Act, The Income Tax Act, and similar laws in vogue. But the banking sector did not get empowered with such a tool till the enactment of the above Act.
Then the Central Government constituted the Narasimham Committee I and II and the Andhyarujina Committee to examine banking sector reforms to find a solution to the growing defaults and recoveries to consider the need for changes in the legal system in respect of those areas.
