Lok Sabha Question No. 2889 (UNSTARRED), answered on 2023-08-07
Subject: SARFAESI ACT, 2002
Ministry: FINANCE
Asked by: T.N. Prathapan, Behanan Benny, Adoor Prakash

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES LOK SABHA

## UNSTARRED QUESTION NO. 2889

TO BE ANSWERED ON Monday, August, 7, 2023/Sravana 16, 1945 (Saka)

## SARFAESI Act , 2002

## 2889. SHRI T.N. PRATHAPAN SHRI BENNY BEHANAN ADV.ADOOR PRAKASH

Will the Minister of FINANCE be pleased to state:

- (a)  Whether  the  Government  is  cognizant  about  the  increasing  unethical  loan recovery  practices  by  various  loan  recovery  companies  by  selling  the  mortgaged property of borrowers/guarantors at less than the guidance value in total violation of the  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of Security Interest Act, 2002 (SARFAESI Act); and
- (b)  if so, the steps taken and being taken by the Government to check unethical loan recovery practices by financial institutions, banks and private Non-Banking Financial Companies, despite the RBI regulations that prohibit any coercion or harassment?

## ANSWER

The Minister of State in the Ministry of Finance (Dr. Bhagwat Karad)

- (a)    The  Central  Government administers the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 which allows banks and financial institutions to recover their dues exceeding one lakh rupees by proceeding  against  secured  assets  of  the borrower/guarantor  without  the intervention  of  the  court/tribunals.  The  Government  is  not  involved  in  commercial decisions or recovery proceedings of banks or financial institutions. As per the existing provision of SARFAESI Act, there is no prescription regarding any 'guidance value' for loan assets.

As  such,  to  address  any  concerns  about  property  valuation,  there  are  adequate provisions under Rule 8 (5) of the Security Interest (Enforcement) Rules, 2002 under the SARFAESI Act, that cast a duty on the Authorised Officer of the secured creditor (bank or financial institution) to obtain the valuation of the property from an approved valuer (as defined in the Rules) and in consultation with the secured creditor, fix the reserve price of the property before putting the property on sale.

(b) All financial institutions, banks and private Non-Banking Financial Companies are required to comply with the guidelines issued by RBI from time to time. Compliance to provisions  of  the  SARFAESI  Act  is  examined  on  sample  basis  by  RBI  during  the Supervisory  Assessment  and  any  noncompliance  observed  are  taken  up  with  the concerned  Financial  Institution/Bank/NBFC  for  rectification  apart  from  initiating supervisory/enforcement action, as deemed fit by RBI.

Further  in  order  to  address  any  concerns  regarding  misuse  of  powers  under SARFAESI by any secured creditor (Banks/Financial Institutions/NBFCs) there are adequate provisions under Section 17 and 18 of the SARFAESI Act, 2002, wherein any  person  (including  borrower)  aggrieved  has  recourse  to  filing  of  Securitisation Application (SA) in the Debts Recovery Tribunal (DRT) against the action of secured creditor under the SARFAESI Act. The decision of DRT can be challenged before the Debts Recovery Appellate Tribunal (DRAT).

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