SARFAESI Act
Full form: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
Loans & CreditSARFAESI Act (2002) allows banks and financial institutions to recover non-performing loans by taking possession of the mortgaged asset without court intervention. If you default on a secured loan and the account becomes NPA, the bank can auction your property after giving proper notices.
In detail
SARFAESI process:n1. Loan account classified as NPA (90 days overdue)n2. Bank issues Section 13(2) notice giving 60 days to repayn3. If unpaid: bank takes symbolic possession (Section 13(4)) -- notice at propertyn4. Bank takes physical possession, values the propertyn5. E-auction held on bank website / NARCLn6. Proceeds used to repay outstanding loann7. Surplus (if any) given to borrowernnNot applicable: loans below Rs 1L, agricultural land
Real-life example
Rohit defaulted on Rs 40L home loan for 8 months (NPA after 3 months). Bank issued SARFAESI notice. He had 60 days to repay. When unable: bank attached property notice board. E-auction conducted -- property sold for Rs 55L. Bank recovered Rs 40L + Rs 3L outstanding interest + Rs 1L legal costs = Rs 44L. Rohit received Rs 11L surplus.