Consider the following statements with respect to “The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”:

  1. The act enables banks to reduce their non-performing assets (NPAs)by auction properties when borrowers fail to repay their loans.
  2. NBFCs are not covered under the ACT.

Which of the above statements is/are correct?

Answer: [C] Both 1 and 2

The SARFAESI Act, 2002 gives powers of “seize and desist” to banks.Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days.If the borrower fails to comply with the notice; the Bank may take recourse to one or more of the following measures:
Take possession of the security for the loan;
Sale or lease or assign the right over the security and
Manage the same or appoint any person to manage the same.

This question is a part of GKToday's Integrated IAS General Studies Module