Legal Question in Banking Law in India

Re: sarfaesi act

I agree with Mr. Reddy.

Re: sarfaesi act

With an aim to provide a structured platform to the Banking sector for managing its mounting NPA stocks and keep pace with international financial institutions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was put in place to allow banks and FIs to take possession of securities and sell them. As stated in the Act, it has �enabled banks and FIs to realise long-term assets, manage problems of liquidity, asset-liability mismatches and improve recovery by taking possession of securities, sell them and reduce non performing assets (NPAs) by adopting measures for recovery or reconstruction.� Prior to the Act, the legal framework relating to commercial transactions lagged behind the rapidly changing commercial practices and financial sector reforms, which led to slow recovery of defaulting loans and mounting levels of NPAs of banks and financial institutions.

So before selling an assest under private treaty you have to take following measures:

� the proper management of the business of the borrower, by change in, or take over of, the management of the business of the borrower

� the sale or lease of a part or whole of the business of the borrower

� rescheduling of payment of debts payable by the borrower

� enforcement of security interest in accordance with the provisions of this Act

� settlement of dues payable by the borrower

� taking possession of secured assets in accordance with the provisions of this Act.

Re: sarfaesi act

The first thing that a bank after taking possession of the secured asset is to have it valued by an approved valuer and put up the property for sale in public auction fixing the upset price as valued by the valuer. If the public auction does not attract bidders, a second auction with a reduced upset price to be arranged. If that also does not fetch the desired price, the bank can go in for private sale of the property. The quotation or offer price made by the private purchaser should be intimated to the borrower/owner of the secured asset with a caveat,if within a stipulated time say 15 to a month the borrower/owner of the secured asset is not able to get a firm offer for a better price, the property will be sold by private treaty at the price quoted by the bank. This is all the safeguard one can prescribe.