Demanding. RBI tells lenders to name debtors whose assets are possessed under Sarfaesi Act

Lenders may have to undertake a huge exercise over the next six months as Reserve Bank of India (RBI) has asked them to display on their website information on borrowers whose secured assets have been taken into possession by them under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

While this information will be helpful for potential buyers, who want to buy assets that are put up for sale/ auction by lenders as “details of “security possessed” and “name of the title holder of the security possessed” will be readily available for verification online, bankers may have to put their shoulder to the wheel for uploading the information sought within the stipulated time.

Uploading granular details (branch name, State, borrower’s name and registered address, guarantor’s name and registered address — wherever applicable, outstanding amount, asset classification, date of asset classification, among others) from 2002, when SARFAESI Act came into force, within the six months deadline set by RBI could be an uphill task, say bankers.

Higher transparency

Every year banks send out thousands of notices for recovery under the Act. RBI said 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. The central bank said this is a part of the move towards greater transparency.

The central bank’s 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 circular is not clear if SARFAESI data has to be uploaded from retrospective effect or prospective effect. What about secured assets acquired in the past and sold? If that also has to be included, then it would be a very big list and data needs to be collected.

“Assets are possessed and sold at field level also and not necessarily done from a centralised level,” said a private sector bank official.

The SARFAESI Act, 2002, provides an enabling legal framework for banks and financial institutions to recover their dues exceeding ₹1 lakh by proceeding against secured assets of the borrower/guarantor without the intervention of the court/tribunals.

Any aggrieved debtor/borrower has recourse to filing of Securitisation Application in the Debts Recovery Tribunal (DRT) against action of secured creditor/financial institution under the SARFAESI Act. The decision of DRT can be challenged before the Debts Recovery Appellate Tribunal (DRAT).

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