Surat : The onslaught of the lockdown in the wake of coronavirus pandemic and deteriorating economic situation has started showing its ugly signs in the diamond city.
About 243 residential properties have been sealed across the city for defaulting on the repayment of bank loan instalments. The financial institutions and banks had sanctioned loan for the 243 projects to the tune of Rs 101 crore.
Sources said that the banks and financial institutions approached the district collector and submitted a memorandum demanding to take action against the loan defaulters under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 few days ago.
The district collector’s office agreed to take action and issued notices under the SARFAESI Act to recover the bad loans. The loan defaulters had mortgaged their properties to purchase new properties on loan from the financial institutions.
WHAT IS SARFAESI ACT
SARFAESI ACT is a legislation that helps financial institutions to ensure asset quality in multiple ways. This means that the Act was framed to address the problem of NPAs (Non-Performing Assets) or bad assets through different processes and mechanisms. The SARFAESI Act gives detailed provisions for the formation and activities of Asset Securitization Companies (SCs)and Reconstruction Companies (RCs). Scope of their activities, capital requirements, funding etc. are given by the Act. RBI is the regulator for these institutions.
As a legal mechanism to insulate assets, the Act addresses the interests of secured creditors (like banks). Several provisions of the Act give directives and powers to various institutions to manage the bad asset problem.