The Full Form of ‘SARFAES’ in Banking is ‘Securities and Reconstruction of Financial and Enforcement of Security Interest’.
Full Form of SARFAES
SARFAES stands for the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This law was enacted in India on May 28, 2002 with the aim to provide an efficient system to take over defaulted assets from borrowers so that they can be restructured or recovered by banks and financial institutions. It also provides legal protection to lenders against any fraudulent activities by borrowers.
The SARFAES Act is a much needed legislation in India’s banking sector as it helps to recover bad loans from borrowers who fail to make payments or repay their debts on time. The act also provides for enforcement of security interests by banks and other financial institutions in order to protect them from any fraudulent activities by borrowers.
Under this act, a bank or a financial institution can take possession of assets given as collateral (called security) if the borrower defaults in repayment of his loan. These assets can then be sold off in order to recover the outstanding debt amount. In addition, the act also empowers these lenders to issue demand notices and initiate proceedings under SARFAESI Act against defaulters without having to resort to lengthy court procedures.
The SARFAES Act has helped banks and other financial institutions to recover their non-performing assets (NPAs) more quickly and efficiently through an out-of-court process rather than having to go through lengthy court proceedings which tend to delay the recovery process significantly.
For instance, earlier lenders had no other option but go through long procedures such as filing cases in various courts including civil courts, high courts etc., which would take months or years before getting any kind of resolution. But now with the help of SARFAESI Act, lenders can issue demand notices directly without having to wait for long periods for any kind of resolution from various courts.
Moreover, under this act banks are also empowered with certain powers such as taking possession of securities (collateral), appointment of asset reconstruction companies (ARCs), sale/disposal or lease/mortgage of secured assets etc., all without having recourse to court procedures thereby making it easier for banks and other financial institutions to recover their money quickly and efficiently from defaulters.
In conclusion, it is safe to say that SARFAESI has been very helpful in solving NPAs problem faced by Indian banking sector due its quick resolution mechanism which allows banks & FIs alike get back their dues quickly & effectively while protecting them from any fraudulent activities by borrowers at same time.
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