The Securitization and Re-
construction of Financial
Assets and Enforcement of Security Interest (SRFAESI)
Act, popularly known as the NPA Act, enacted in December 2002, is
a long awaited statute for banks and Financial Institutions
(FIs). It empowers the banks to directly enforce the security
interest pledged at the time of sanctioning the loan without having to
go through the judicial process. The only recourse for the banks
and FIs to enforce their claims against the defaulters was through
Debt Recovery Tribunals (DRTs) and Civil Courts until the
enactment of NPA Act.
The NPA Act has provided the secured creditors the
much needed strength and the power of recovery of their money from
defaulters. Banks have been able to recover over 41% of the bad
loans for which proceedings were initiated in 2006-07 under the Act.
Recycling of funds is the raison d'etre of banking activities.
Banks deal with public money. They accept deposits and deploy
that money for the developmental and the productive purposes. When
a bank's advance ceases to generate income it becomes a Non
Performing Asset (NPA). These NPAs further deter the credit
creation process of the banks thereby causing a grave concern. One of
the serious problems looming large before the banks is
recovering dues from the defaulters. |
