Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act


The securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2000 is an India Law. This Law is Used to recover the loan and to auction residential and commercial properties. This Law does not apply at the time of Unsecured Loan, Loan which is below the 100,000 or where the debt is below the 20% of the original Principles.

The Financial Sector plays an important role in the development of the economy. So, this Act helps to the recovery of defaulting Loan and escalating level of non-performing assets of banks and financial Assets.

Narasimham  Committee I and II  and Andhyarujina  Committee for examining the banking sector reform was constituted by the central Government.

the committee has provided suggestion for empowering gain and financial institution.

The Sarfaesi Act passed on 17  December 2002. It provides help to the Indian lenders to recover the Loan. It provides Power to the Bank and Financial Institution to auction the property for recovering the loan from the borrowers and to take help from civil court to recover their dues. After giving 60 days notice, the lender have a right to take possession of the borrowers.


1.   For an Assets reconstruction company or carry the business of securitization, It is necessary to obtain the certificate of registration by the Reserve Bank of India.

2. It ensures the  Assets reconstruction company to raise the fund after issuing the security receipt

3. Any presentation of a securitization company is treated as a public company if it is registered with the Reserve Bank of India

4.  It increases the fund of assets reconstruction company by issuing security receipt to qualified buyers.

Objectives of sarfaesi Act 2002

1. Recovery of non-performing assets of the Bank

2. When borrowers fail to pay, it allows the banks and financial institution to auction the property.

Documents required

E-form CHG-1 or E-form CHG-9 is essential for the application of registration and Modification (other than a debenture) . It also includes modification charges by the and Assets reconstruction company in the term of securitization and reconstruction of financial assets and enforcement of securities interest Act 2002.

The document are as follow

1. Some charges

2. registration certificate

3. Copy of instrument modify the charge

4. Sanction letter

If it is done digitally then necessary documents are required like DSC charge holder, Director identification number of the Director, PAN number of manager, CEO, CFO,  membership number of company secretary

Formation  of Sarfaesi Act 2002

1. It is formed for regulating securitization and reconstruction of financial Assets

2. It is formed for the enforcement of security interest.

Roles of sarfaesi Act 2002

1. It is used for the securitization of financial assets.

2. It helps in the issue of security receipt

3. It helps in the reconstruction of financial assets- without the intervention of the court

4. Other function-acts as an agent of the bank for recovery acts as receiver appointed by the court

      Recently Supreme court stated that SARFAESI ACT 2002 will be applicable in the cooperative Bank not only commercial Bank. Generally, co-operative Banks are not covered under the Bank but after 2013, co-operative comes under the name of Bank. So cooperative can use SARFAESI.

The petition had filed before the Supreme Court questioning authority of notification and power of parliament for amending the SARFAESI ACT . But supreme court solved the matter by giving a decision in favour of the cooperative Bank. It helps the cooperative bank at the time of delay by the involvement of civil court and cooperative tribunals.


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