SARFAESI Act (2002) empowers banks and financial institutions to recover non-performing assets (NPAs) by seizing and selling the collateral without court intervention. The process involves a 60-day notice to the borrower, after which the lender can take possession of the secured asset.
This act significantly strengthened lenders’ ability to recover bad loans in India, reducing the burden on already overloaded courts. It applies to secured loans where the outstanding amount is ₹1 lakh or above and the asset has been classified as NPA (90+ days of non-payment).
Borrowers can challenge SARFAESI action by approaching the Debt Recovery Tribunal (DRT) within 45 days of action. The act does not apply to agricultural land, loans below ₹1 lakh, or where the security interest is less than 20% of the outstanding principal.
SARFAESI Act governs what happens when secured loan repayments fail. Borrowers must understand these provisions to appreciate the real consequences of default on secured loans.
Nihal Fintech educates clients about SARFAESI provisions during loan counseling, emphasizing the importance of maintaining regular repayments and communicating with lenders during financial difficulties.
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