NPA Woes SARFAESI – Brahmastra in Bankers’ Hands

Abstract

One of the biggest challenges facing banks is the huge Non Performing Accounts. Even though the picture looks gloomy, there are effective tools in the hands of banks to recover NPA accounts. Among these tools, taking action under SARFAESI Act is the most powerful method to recover NPAs.

Through SARFAESI action banks can recover their dues, without going through the hassles of filing a case in a civil court.

The article presents the systematic approach for SARFAESI action and step-by-step procedure.

There are certain eligibility criteria for taking action under SARFAESI, such as the minimum in account balance and the balance outstanding as a percentage of money already recovered from the borrower.

The first step is to issue a Demand Notice giving 60 days’ time to the borrowers/mortgagors for paying the full dues. If the borrower/guarantor needs clarification on the contents of the notice, the bank has to send a reply for the same. After the notice period, the bank takes possession of the property. Such possession can be either actual possession or a symbolic possession. Possession notice is dispatched to the borrowers/mortgagors. It is also published in two newspapers.

A fresh valuation is taken and the SARFAESI committee discusses and arrives at the floor price for auction.

A sale notice is issued and the borrowers/ mortgagors are given 30 days’ time for repayment of dues. Steps are simultaneously taken for making the auction a success.

E-auction is conducted and the sale is concluded. The sale proceeds are credited to the NPA account.

The article gives certain Court judgments relating to banks taking action under SARFAESI Act.

SARFAESI action will certainly bring the desirable results and the bank dues can be recovered within 100 days, if the steps are taken with utmost care and caution.