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Sunday, 11 November 2012

Ways to buy a home and SARFAESI Act,2002

3.Buying a property auctioned by the banks:

When people default on their monthly EMI's for the property bought with home loans, banks repossess these properties and auction them off to recoup their losses and bad loans using the SARFAESI ACT 2002.

What is SARFAEST ACT 2002?

Prior to 1993, the banks had to approach civil courts for recovery of dues. This process was the time consuming and the fund was blocked in the litigation. Civil courts failed to deliver both in ascertainment of dues and execution of decree.

Recovery of debts due to banks and financial institutions(RDDBFI) Act 1993 brought the time span for adjudication of dues. The problem of ascertainment of dues was solved but failed to deliver in execution if decree.
In late 2002, The parliament passed the Act Sarfaest , which extends to the whole of India, giving banks the power to aggressively recover loans from defaulters by seizing their assets. 

 SARFAEST Act 2002 provides a procedure by which banks can serve notice to a borrower for payment of a defaulted loan. In the event of non- compliance, the bank may proceed with actions to take possession and dispose of the aspects.

The Act deal with three aspects.

1. Enforcement of security interest by secured creditor(Banks/Financial Institutions).

2.Transfer of non-performing assets to assets reconstruction company, which will then dispose of those assets and realize the proceeds.

3. To provide a legal frame work for securitization of assets.

This act successfully solved the problem of ascertainment of dues and execution of decree.

1.This Act lays the emphasis on recovery of the money, even without the intervention of court.

2.The banks were empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured assets.

3.The role of the court was limited to challenge the measures by way of appeal, that too on deposit of 75% of amount claimed on the notice.

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S.V.SAIBABA said...

Thank you for this useful post
S.V.Sai baba
Retired Bank executive

worldknowledge said...

You are most welcome and thank you for visiting

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