Definition
Securitisation and SARFAESI
The SARFAESI Act empowers banks to seize and sell the collateral of defaulting borrowers without court intervention to recover dues.
The SARFAESI Act lets secured lenders enforce their security — taking possession of and selling pledged or mortgaged assets — to recover bad loans without first going to court, subject to notice and safeguards. It also enables the setting up of asset reconstruction companies to buy and resolve distressed debt.
By speeding recovery, SARFAESI strengthened creditors' hands and improved credit discipline, complementing the IBBI-led insolvency process for larger cases. Borrowers retain the right to appeal to specialised tribunals, balancing recovery with due process.
Related terms
- IBBIIBBI is the Insolvency and Bankruptcy Board of India, the regulator that oversees the insolvency resolution ecosystem under the Insolvency and Bankruptcy Code.
- Bank RecapitalisationBank recapitalisation is the infusion of fresh capital into public sector banks, often by the government, to shore up their balance sheets and lending capacity.
- Twin Balance Sheet ProblemThe twin balance sheet problem describes the simultaneous stress on over-leveraged corporate borrowers and the banks burdened with their bad loans.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.