Understanding the SARFAESI Process
What is SARFAESI?
The SARFAESI Act allows banks and financial institutions to recover non-performing assets (NPAs) without going through the lengthy court process. It is applicable only when the loan is secured by assets such as property, machinery, etc.
When Does It Apply?
SARFAESI is typically invoked when a borrower defaults and their account is classified as an NPA, which means payments have been overdue for more than 90 days.
Key Stages in SARFAESI
- Loan turns into NPA: After 90 days of non-payment, your account may be classified as a Non-Performing Asset (NPA).
- 60-Day Demand Notice: The lender sends a legal notice demanding repayment within 60 days.
- Opportunity to Respond: The borrower can raise objections or repay dues during this 60-day window.
- Possession Notice: If dues remain unpaid, the lender may take possession of the secured asset — either physically or symbolically.
- Auction/Sale of Property: The lender may initiate sale or auction of the property to recover dues. A public notice will be issued.
- Right to Appeal: The borrower can challenge the action by filing an appeal with the Debt Recovery Tribunal (DRT).
What You Can Do as a Borrower
- Pay off overdue amounts or negotiate a repayment plan within the 60-day notice period.
- Submit written objections or explanations to the bank — they are required to reply within 7 days.
- If assets are taken, explore legal options through DRT or settlement through third-party resolution experts.
How SolveDet Can Help
At SolveDet, we assist MSMEs and borrowers in restructuring loans, negotiating with lenders, and exploring ARC transfers before matters escalate. If your loan account is under stress or you have received a SARFAESI notice, we can guide you through your options.