Economics • Banking & FinanceHard
Evaluate the mechanism of the 'Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'. Under what conditions can secured creditors enforce security interests without court intervention?
A. When a borrower defaults on repayment and the account is classified as a non-performing asset, allowing creditors to take possession of collateral after giving a 60-day notice.✓ Correct Answer
B. Only after obtaining a formal decree from the Debt Recovery Tribunal following a mandatory three-year legal trial.
C. When the central government declares a national financial emergency suspending commercial litigation nationwide.
D. Only when the borrower voluntarily surrenders the property titles in exchange for complete debt waiver.
💡 Solution & Explanation
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act empowers banks to recover dues swiftly by seizing and selling collateral without court intervention once an account is classified as non-performing after a sixty-day notice. Alternative procedures require judicial decrees which create prolonged delays in asset resolution. This legislation was enacted to strengthen creditor rights and accelerate bad loan recovery.
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