Analysing the Effectiveness of Debt Recovery Mechanisms for Banks in India: A Special Focus on the SARFAESI Act, 2002

  • Bhavya Sharma
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  • Bhavya Sharma

    Student at Amity Law School, Noida, India.

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The effectiveness of bank debt recovery systems is crucial to a country's financial stability and economic progress. In India, where non-performing assets (NPAs) have been a persistent challenge for the banking sector, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002 is a critical legislative intervention aimed at addressing this issue. This research study presents a comprehensive review of the efficiency of debt collection methods for Indian banks, with a special emphasis on the SARFAESI Act of 2002. The paper opens with an overview of debt collection processes in India, including their historical development, regulatory frameworks, and institutional mechanisms. It then gets into the provisions and aims of The SARFAESI Act, analysing how it permits banks to recover NPAs and enforce security interests through mechanisms like as asset reconstruction and security interest enforcement without court intervention. Furthermore, the report assesses the SARFAESI Act's influence on debt recovery, asset quality, and bank financial health. It examines the issues and constraints that banks encounter when implementing the SARFAESI Act, such as legal obstacles, procedural delays, and borrower opposition. Furthermore, the article investigates current modifications, court interpretations, and regulatory actions affecting the SARFAESI Act, providing insights into its changing landscape. Based on comparative analysis and practical insights, the report closes with recommendations for improving the effectiveness of debt collection systems in India, including proposed modifications to the SARFAESI Act policy ramifications for regulators, policymakers, and the banking industry. Overall, this study contributes to the continuing discussion about debt settlement and financial stability, providing useful insights for stakeholders in India's banking and financial environment.


Research Paper


International Journal of Law Management and Humanities, Volume 7, Issue 2, Page 1673 - 1692


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