Information in respect of the borrowers whose secured assets have been taken into possession by the REs under the SARFAESI Act, 2002 needs to be displayed, Reserve Bank of India instructed.
This information will be helpful for potential buyers who want to buy assets that are put up for sale/ auction by lenders.
It will help them to verify the details of security possessed and the name of the title holder online.
“As a part of the move towards greater transparency, it has been decided that the Regulated Entities (REs) of the Reserve Bank which are secured creditors as per the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, shall display information in respect of the borrowers whose secured assets have been taken into possession by the REs under the Act,” the central bank said in its circular.
The central bank said this is a part of the move towards greater transparency.
What information needs to be displayed?
According to an annex provided by the central bank, granular details like: Branch Name, State, Borrower Name, Guarantor Name, Registered address of the Borrower, Registered address of the Guarantor, Outstanding amount, Asset Classification, Date of Asset classification, Details of security possessed, and Name of the Title holder of the security possessed.
It is to be noted that every year, banks send out notices for recovery under the Act.
The first list containing details of secured assets possessed under the SARFAESI Act, 2002 should be displayed on the website of REs within six months from the date of this circular, and the list shall be updated on monthly basis, RBI said.
However, one clarity that is still sought is whether the data has to be uploaded from retrospective effect or prospective effect.
Do banks need to upload details of the secured assets acquired in the past and sold too?
Directive is applicable to Commercial Banks, Urban Co-operative Banks/ State Co-operative Banks/ Central Co-operative Banks, All India Financial Institutions, Non-Banking Financial Companies including Housing Finance Companies, and Asset Reconstruction Companies.
The SARFAESI Act, 2002
Till early 1990s, the civil suits were being filed for recovery of the dues of banks and financial institutions under the Act 1882 and the Code of Civil Procedure, 1908 (CPC).
However, due to various difficulties the banks and financial institutions had to face in recovering loans and enforcement of securities, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
On the continuing rise in number of NPA at banks and other financial institutions in India; a poor rate of loan recovery and the failure of the existing legislation in redressing the difficulties of recovery by banks; the Narasimham Committee I & II and Andyarujina Committee were constituted by the Government for examining and suggesting banking reforms in India.
On the recommendations of the Narasimham Committee and Andyarujina Committee, the SARFAESI Act was enacted to empower the banks and financial institutions to take possession of the securities and to sell them without intervention of the court.
The Act enables the classification of the borrower’s account as a non-performing asset in accordance with the different directions that are given or under the guidelines being issued by the RBI from time to time.
