Enforcement of SARFAESI Act

Helping Secured Creditors in Enforcing SARFAESI Act with the Help of Skilful Legal Team

Introduction to SARFAESI Act

The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002, is an Indian law enacted in 2004. SARFAESI was created to allow banks and financial institutions to auction residential and commercial properties if the borrowers do not repay the loans. It also helps banks to recover their non-performing assets (NPAs) without court interference.

What is Non-Performing Asset (NPA)?

Whenever a borrower doesn’t pay his/her mortgage loan or EMI for a consecutive period of 3 months, then the banks are authorised to declare that particular loan account as a Non-Performing Asset. Under the provision of SARFAESI Act, banks are eligible to seize and sell the collateral properties of the defaulters within 60 days of demanding repayment without the permission of the court.

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Significance Of The SARFAESI Act

The entire objective of the enactment of the SARFAESI Act is to facilitate the recovery of the dues of banks and financial institutions by a non-judiciary body. This act helps banks and financial institutions to expeditiously pursue their security interests without attempting to transfer to a court or tribunal.

Thus the SARFAESI Act, 2002 was then passed after a comprehensive perusal, allowing banks and financial institutions to resolve the problems of liquidity, long-term assets, increased NPAs and delay in loan recovery (reconstruction).

Which all cover under SARFAESI ACT?

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Which all cover under SARFAESI ACT?

  • The provisions of the SARFAESI Act refer only to NPA loans with outstanding amounts above Rs. 1 lakh.
  • NPA [Non-Performing Asset] Loan accounts where less than 20 percent of the principal is the amount due / outstanding and interest are not liable for this Act to be dealt with.
  • The Act does not applicable to agricultural property and also any security interests covered under agricultural land.

What are Asset Reconstruction Companies?

Under the SARFAESI Act , 2002, the secured creditors are granted the right to seize the secured asset and sell it in order to recover dues promptly by legal procedures. Thus the concept of the Asset Reconstruction Company (ARC) was developed through these legal procedures and retrospective in effect.

Asset Reconstruction Companies are specialized financial institutions that buy the NPAs or bad assets from banks and financial institutions and convert them into good loans. Asset Reconstruction Company buys bad assets from the banks at a mutually agreed rate. These companies help in cleaning up of the balance sheets of banks.

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Salient Features of SARFAESI Act

The below mentioned points are the salient features of the Act, which tries to:

  • Securitise the financial assets (securitisation)
  • Securitise the financial assets (securitisation)
  • Enforce Security interest by the secured creditor (without court intervention)
  • Enforce Security interest by the secured creditor (without court intervention)
  • Reconstruct the financial assets
  • Establish Central Registry

How Kenstone Capital Can Serve You in Enforcing SARFAESI Act?

At Kenstone Capital, we undertake end to end outsourcing of procedure involved and legal actions as laid down under Chapter III of s SARFAESI Act and The Security Interest Enforcement Rules, 2002. With us onboard, you can work with a dedicated team of Security Enforcement experts to recover long standing dues at record pace.

As we have a skilful legal team specialized in enforcing SARFAESI ACT, we can take up all the proceedings involved in securitization and can help banks in maximizing their loan recovery. Furthermore, with the help of our state-of-art technologies we made the whole process simple and effective from issuing demand Notice and Possession Notice to Valuation and Procedure of Sale.

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