The Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act,2002 (SARFAESI) empowers banks [financial institutions to recover their non-performing assets without intervention of court. The Act provides 3 alternate methods for recovering of NPA namely- Securitization Asset Reconstruction Enforcement of security without intervention of court Provisions of this Act are applicable only for NPA loans with outstanding balance bove 1 lakh rupees.
NPA loan accounts where the amount is less than 20% of the principal and Interest are not eligible to be dealt with under this Act. NPAs should be backed by securities charged to the bank by way of hypothecation or mortgage or assignment-security Interest by way of purchase and lease not liable for attachment under Sec 60 of CPC ,are not covered under this Act. Strengths of the Act- The Act empowers the Bank: 1 . To Issue demand notices to the defaulting borrower and guarantor,calllng upon hem to discharge their dues in full within 60 days from the date of notice.
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