What is the Sarfaesi Act?
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Suppose, Mr.Paraajay has opened factory with Rs.100 crores. He financed this, via mixture of Debt + equity in following way. Holder Rupees in Cr. Equity (IPO->Shares) Paraajay and his family 20 Juntaa (public) 30 Debt (loans, Bonds) Business loan from SBI 40 Bonds 10 Total 100 Initially the company runs well and good. But then Mr.Paraajay doesn’t revise his MBA books often, so he forgets the business concepts. His company starts making losses. He fails to pay loan EMIs for many months. SBI gives him notice to correct his behavior. Still, he doesn’t start paying money. SBI declares this Rs.40 crores loan NPA (Non-Performing Asset). Once a loan is declared as non-performing asset, SBI can take actions under SARFAESI act, to recover the loan money. Bank have following powers under SARFAESI Act Take possession of Mr.Paraajay’s assets without requiring court order. (Commericial or ...