When a borrower receives a notice under the SARFAESI Act, it signifies that their loan account has been classified as a Non-Performing Asset (NPA). The lender gives the borrower a period of 60 days to repay the outstanding dues. Failure to comply allows the lender to take possession of the secured asset and sell it to recover the debt.
What is a SARFAESI Act notice?
The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) empowers banks and financial institutions to recover their dues without court intervention. Once a borrower defaults, the lender can issue a notice demanding repayment within 60 days. This notice is a formal declaration that the borrower's account is now an NPA and they must clear their dues to avoid further action.
What happens if you don’t repay within 60 days?
If the borrower does not repay within the 60-day notice period, the lender can take possession of the secured asset. This includes issuing a possession notice, taking physical control, and eventually selling the asset via auction to recover the dues. However, borrowers still have the right to repay the outstanding amount before the asset is sold, which can stop the sale process.
Can you challenge the SARFAESI notice?
Yes, borrowers can challenge the SARFAESI notice by filing an appeal with the Debt Recovery Tribunal (DRT) within the 60-day period. The appeal must be accompanied by a deposit of 50% of the amount claimed by the lender, though this can be reduced to 25% at the discretion of the tribunal. If the borrower believes the notice is unjustified, this legal route provides a platform to dispute the lender's claims.
Does this affect your CIBIL score?
Yes, receiving a SARFAESI notice typically indicates that the borrower's account has been classified as an NPA, which negatively impacts their CIBIL score. Since banks report NPAs to credit bureaus, this can significantly lower the borrower’s score, affecting their ability to secure future credit. It is crucial for borrowers to address the notice promptly to mitigate further damage to their credit profile.
This information is general and not financial or legal advice for your specific situation.