SARFAESI ACT 2002 and Rules in Banks Brief Notes

SARFAESI ACT Stands for Securitisation and Reconstruction of financial assets enforcement of security interest ACT) allows banks and financial institutions to auction properties of borrowers who fail to repay their loans.

  • SARFAESI ACT has come in the year 2002 mainly to help the bank which is unable to recover loan amounts and going to a court of law (which will normally take more time in our country).
  • If a customer/borrower who took loan on property was unable to repay for 6 six months at a stretch will fall under this law. Banker has to give give notice for 60 days tenure (under section 13(2) & 13(4) of SARFAESI ACT) to the borrower and surety.
  • If the amount is not repaid in that time then bank can sell the property in public auction for closing the loan account.The price of the property will be evaluated by Professional valuers according to present market value and banks will set minimum Bid amount. These bids are published in newspapers for public auction.
  • If the loan amount is more than the auction amount, banker will file a separate case for recovery.
  • If the auction amount is more than loan amount, bank will refund the amount to the borrower.
  • Plus point in it is as bank is selling this property there will be more clarity on title of property and minus is buyer has to check if there are any previous dues other than these.

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