Economics • Banking & FinanceMedium
What is the primary objective of the 'Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act' (SARFAESI Act, 2002)?
A. To nationalize private sector commercial banks
B. To enable banks and financial institutions to auction residential or commercial properties to recover loans without court intervention✓ Correct Answer
C. To regulate foreign direct investment in retail banking
D. To provide insurance cover on bank deposits up to a specified limit
💡 Solution & Explanation
The SARFAESI Act of 2002 empowers banks and financial institutions to recover secured non-performing assets without judicial intervention through the enforcement of security interests and asset reconstruction. Unlike deposit insurance schemes or banking nationalization acts, this legislation bypasses prolonged civil court procedures to fast-track debt recovery. It allows secured creditors to take possession of collateral after issuing statutory demand notices to defaulters.
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