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Module: General Practice

Q99: Under the SARFAESI Act, 2002, what is the minimum outstanding debt threshold required for a secured creditor to enforce security interest?

A
The total outstanding debt must be more than ₹50,000.
B
The total outstanding debt must be more than ₹10 Lakhs.
C
The total outstanding debt must be more than ₹1 Lakh, and the amount due must exceed 20% of the principal amount and interest.
D
The total outstanding debt must be more than ₹20 Lakhs, irrespective of the percentage of repayment.
✅ Correct Answer: C
🎯 Quick Answer:
> ₹1 Lakh and > 20% of principal/interest.
Concept Definition: The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) allows banks to auction properties to recover loans without court intervention.
Structural Constraints: Minimum Debt: Section 31(h) exempts cases where the amount due is less than ₹1,00,000.
Residual Value: Section 31(j) exempts cases where the remaining debt is less than 20% of the principal amount and interest.
Causal Reasoning: These thresholds prevent banks from invoking harsh recovery measures for trivial amounts or loans that are almost fully repaid.
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