In the backdrop of the rising cases of defaults and growing disenchantment of banks with the Securitization Act, it is imperative that necessary amendments are made in the existing Act.The Securitization Act, also known as SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, came into force in 2002. The Act empowers banks to deal with the chronic problem of NPAs (Non-Performing Assets). It gives them the power to enforce their security interests and further improve their lending capacities.

The RBI has taken significant steps to revive those banks, which suffered capital erosion due to rising NPA levels. It introduced a capital to risk-weighted assets ratio of 8% (which now stands at 9%) and fortified the management of NPAs by enacting the SARFAESI Act, 2002, which provides statutory support for the enforcement of creditors' rights, thereby, paving the way for the establishment of the Asset Reconstruction Companies. It established Debt Recovery Tribunals (DRT) to recover loans, and introduced reforms in respect of Regional Rural Banks (RRBs) and Non-Banking Finance Companies (NBFCs).

Securitization, Companies, Reconstruction, SARFAESI, capital, chronic, amendments, creditors', disenchantment, SARFAESI, e SARFAESI Act, enforcement of creditors' rights, establishment of the Asset Reconstruction Companies, It Debt Recovery Tribunals (DRT).