Module: General Practice
Q125: Which of the following statements most accurately defines the primary objective and scope of the SARFAESI Act, 2002?
✅ Correct Answer: B
The SARFAESI Act, 2002, was enacted to allow banks and financial institutions to recover their non-performing assets (NPAs) without the intervention of the Court.
Core Mechanism: The Act empowers secured creditors to enforce their security interest, meaning they can take possession, manage, or sell the collateral, if the borrower defaults and the account is classified as an NPA.
Structural Requirement: The enforcement process typically begins with a demand notice issued under Section 13(2). Historical Context: Prior to SARFAESI, banks had to file civil suits in Debt Recovery Tribunals under the RDDBFI Act, 1993, which was time-consuming.
SARFAESI provided the "Self-Help" remedy to speed up recovery.
Core Mechanism: The Act empowers secured creditors to enforce their security interest, meaning they can take possession, manage, or sell the collateral, if the borrower defaults and the account is classified as an NPA.
Structural Requirement: The enforcement process typically begins with a demand notice issued under Section 13(2). Historical Context: Prior to SARFAESI, banks had to file civil suits in Debt Recovery Tribunals under the RDDBFI Act, 1993, which was time-consuming.
SARFAESI provided the "Self-Help" remedy to speed up recovery.