- Introduction and History of the Act
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) represents a significant legislative measure undertaken by the Indian Parliament to address the critical issue of non-performing assets (NPAs) within the banking sector. The act was promulgated with the primary objective of enabling banks and financial institutions to expedite the recovery of dues without the intervention of courts, thereby facilitating the improvement of asset quality and financial stability within the system.
- Historical Context
The SARFAESI Act’s genesis can be traced to the early 1990s, a period characterized by economic liberalization and banking sector reforms in India. The rising incidence of NPAs, aggravated by inadequate legal frameworks for swift recovery, necessitated a robust mechanism to enforce security interests. The Narasimham Committee on Banking Sector Reforms (1991) and the Andhyarujina Committee on Banking Laws (2000) underscored the urgent need for a dedicated framework to address the mounting NPAs and suggested the creation of an efficient recovery mechanism. This led to the enactment of the SARFAESI Act, which received presidential assent on December 17, 2002, and came into force on June 21, 2002.