A new Bill introduced in Lok Sabha on recently to amend the existing home/real estate loan related SARFAESI ( Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act 2002 . This Bill, The Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Bill 2011 was introduced by Mrs. Namo Narain Meena, Minister of state for Finance.
According to this propasal, Banks and HFC's (Housing Financial Companies) may soon be allowed to accept immovable property in full/partial satisfaction of claims against defaulting borrowers.
Now, banks are not empowered to accept immovable property in full/ partial satisfaction of the claim against the defaulting borrower, if no bidder comes to bid or banks are unable to find a buyer for such assets. Banks, as secured creditors, are however, permitted to sell the securities to realise the defaulted loans.
Highlights of New Bill..!
# The new bill provides for mandatory registration of all securitisation, reconstruction and creation of security interest transactions in the Central registry. All such transactions that are subsisting on or before the establishment of the Central registry will also have to be registered.
# The Bill would also enable securitisation firms to convert any part of debt into shares of the borrowing company. At present, reconstruction or securitisation firms cannot convert their debt into equity in cases of business reconstruction, rehabilitation or revival.
Another significant proposal relates to allowing multi-state co-operative banks to initiate proceedings through DRTs (Debt Recovery Tribunals). Also, banks or any person will soon be empowered to file a caveat so that before granting any stay, they are heard by the DRT.
Note : SARFAESI - The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, was enacted to regulate securitisation & reconstruction of financial assets and enforcement of security interest.
According to this propasal, Banks and HFC's (Housing Financial Companies) may soon be allowed to accept immovable property in full/partial satisfaction of claims against defaulting borrowers.
Now, banks are not empowered to accept immovable property in full/ partial satisfaction of the claim against the defaulting borrower, if no bidder comes to bid or banks are unable to find a buyer for such assets. Banks, as secured creditors, are however, permitted to sell the securities to realise the defaulted loans.
Highlights of New Bill..!
# The new bill provides for mandatory registration of all securitisation, reconstruction and creation of security interest transactions in the Central registry. All such transactions that are subsisting on or before the establishment of the Central registry will also have to be registered.
# The Bill would also enable securitisation firms to convert any part of debt into shares of the borrowing company. At present, reconstruction or securitisation firms cannot convert their debt into equity in cases of business reconstruction, rehabilitation or revival.
Another significant proposal relates to allowing multi-state co-operative banks to initiate proceedings through DRTs (Debt Recovery Tribunals). Also, banks or any person will soon be empowered to file a caveat so that before granting any stay, they are heard by the DRT.
Note : SARFAESI - The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, was enacted to regulate securitisation & reconstruction of financial assets and enforcement of security interest.
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