RAS question
The SARFAESI Act, 2002 enables banks and financial institutions to do which of the following?
Correct answer: (A) Recover NPAs without court intervention by seizing secured assets.
The SARFAESI Act, 2002 enables banks and financial institutions to recover non-performing secured debts by taking possession of and selling secured assets without court or tribunal intervention.
Explanation
SARFAESI stands for the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Its tested purpose here is the enforcement of security interest: under Section 13, a secured creditor may enforce security interest without the intervention of a court or tribunal. When a borrower defaults, and the secured debt account is classified as a non-performing asset, the creditor can issue a written notice requiring full discharge of liabilities within 60 days. If the borrower does not pay within that period, the creditor may take possession of the secured assets and transfer them by lease, assignment or sale to realise the secured debt. That is why option A captures the Act's core recovery mechanism.
Why the other options are wrong
- (B) Setting interest rates for all banks belongs to the monetary-policy and regulatory framework, not to SARFAESI's mechanism for enforcing security interest against secured assets.
- (C) Printing or authorising additional currency notes is an RBI function, whereas SARFAESI deals with recovery of secured debts from defaulting borrowers.
- (D) Nationalising private banks would require a separate government law; SARFAESI instead empowers secured creditors to recover dues by enforcing security over assets.
Concept
This tests banking-sector reforms and NPA recovery, a recurring RAS economy theme because it links financial stability, credit discipline and statutory recovery mechanisms. The key distinction is between a bank's recovery power as a secured creditor and broader RBI or government powers.