Sarfaesi Act most effective tool to recover bad loans: Report
Amidst rising non-performing loans, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act) was the most potent tool in the hands of banks for recovering bad loans.
The Sarfaesi Act empowers banks and financial institutions to recover their non-performing assets without the intervention of courts.
The Act provides three alternative methods for recovery of non-performing assets — securitisation, asset reconstruction and enforcement of security — without the intervention of courts.
According to the RBI's Report on Trend and Progress of Banking in India, 2012-13, banks have recovered Rs 18,500 crore through the Sarfaesi route. Also, in terms of efficiency, the Act has proved to be more effective than the debt recovery tribunals (DRTs) or mediation by Lok Adalats.
Pratip Chaudhuri, former SBI Chairman, in an interview to Business Line in September had said that stay orders by DRTs led to delay in recoveries. Read more
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