The SARFAESI Act: A Regulatory Framework for NPAs in India

Abstract

In India the Banking Sector dominates the financial market and has become crucial to Country’s development and its economic growth. In the past few decades it has emerged as the backbone of the Country’s economy mainly because, it is the banking sector that finances all the big projects in the country undertaken by the Government or big companies. However, in recent times the NPAs have become a major threat against the expansion of banking sector in the Country because they render such banks incapable of dispersing the surplus in the deficit sector. Before the enactment of the SARFAESI Act, there was literally no other option for the banks to recover their loan apart from getting help from the civil courts. But even this was a huge problem for them because of the time it may take to get a final decree. But since the enactment of the Act the banks have now become empowered to enforce the security to recover their loans. Hence, this paper primarily aims to examine the effectiveness of the recovery mechanism and certain problems in the implementation of the Act itself. Furthermore, this paper also endeavours to analyse the SARFAESI Act and the modes of recovery stipulated by it. Thereafter, concluding it with recommendations.