Economics • Banking & FinanceMedium
What is the primary function of the 'Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002'?
A. To regulate foreign direct investment in retail banking
B. To allow banks and financial institutions to auction residential or commercial properties to recover loans without court intervention✓ Correct Answer
C. To establish rural cooperative banks across backward districts
D. To manage foreign exchange reserves of the country
💡 Solution & Explanation
The SARFAESI Act of 2002 enables banks and financial institutions to recover non-performing assets by enforcing security interests without requiring lengthy court intervention. Other regulatory frameworks handle foreign exchange or foreign direct investment, whereas this specific legislation targets bad loan recovery. It grants lenders the legal authority to auction secured assets after issuing a sixty-day notice to defaulting borrowers.
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