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The financial sector has been one of the key handlers in India’s efforts to achieve success in rapidly developing its economy. Since our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This ensures the slow pace of recovery of defaulting loans and escalating levels of nonperforming assets of banks and financial institutions.
Narasimham Committee I and II and Andhyarujina Committee was constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas.
Amongst the other committees, these Committees have made suggestions to form new legislation for securitization and empowering banks and financial institutions to gain possession of the securities and to sell them without any intervention of the court here.
The amendment to this Act is “an act to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a central database of security interests created on property rights, and for matters connected therewith or incidental thereto.” The Act deals with the following:
e-Form CHG-1 or e-Form CHG-9 is required to be filed for application of a. Registration of creation b. Modification of charge (other than those related to debentures) including particulars of modification of charge by Asset Reconstruction Company in terms of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 [SARFAESI] The documents in this context are as follows:
In case of any e-Form to be digitally signed, either of the following is required:
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) were circulated:
It extended to the whole of India. Amendment in the (SARFAESI) Act, 2002 vide the enforcement of the Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisional information in the Official Gazette, s (Amendment) Act, 2016 was published It is an Act further to amend four laws:
Any asset, i.e. movable or immovable, given as security by way of hypothecation, mortgage, or creation of a security interest in any other form except those excluded under Section 31 of the Act are covered under the SARFAESI Act.
The Ministry of Finance, vide its notification dated 24th February 2020, notified that the NBFCs with asset size of Rs.100 crores or more are eligible NBFCs that are covered under the SARFAESI Act to enforce security interest on debts amounting to at least Rs.50 lacs.
The provisions of this Act apply to outstanding loans above Rs.1 lakh, which are classified as NPAs. The SARFAESI Act isn’t applicable for:
The Act provides for three methods of recovery of the NPAs, which includes:
Yes. The Supreme Court held that cooperative banks established under State law or multi-State level societies come within the ambit of the SARFAESI Act, 2002.
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