Unit – 20 : Definitions at SARFAESI ACT, 2002
- Preamble – An act to regulate Securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto
- Appellate Tribunal – Any person aggrieved by the order passed by DRT can file an appeal to the authority called as Appellate Tribunal.
- Asset Reconstruction –
- Bank – All the banking companies, Nationalised banks, Cooperative banks and RRBs.
- Board – SEBI under SEBI Act 1992.
- Borrower – granted financial assistance, given guarantee, has
- Central Registry – All the transactions of asset Securitisation, reconstruction as well as transactions of creating security interest will have to be registered with this authority.
- Debt Recovery Tribunal – these tribunals deal with the cases of recovery of debts. Above Rs. 10 Lakh due to banks and financial institutions.
- Default
- Financial Assistance
- Financial Asset – a claim to any debt or receivables and includes :
- A claim to any debt or receivables or part thereof whether secured or unsecured, or
- Any debt or receivable secured by mortgage of or charge on immovable property or
- A mortgage, charge, hypothecation or pledge of moveable property, or
- Any right of interest in the security, whether full or part, securing debt, or
- Financial Institution
- Hypothecation
- Non-Performing Asset
- Originator
- Obligor – Borrower or any other person liable to pay to the bank
- Property
- Qualified Institutional Buyer
- Reconstruction Company
- Scheme
- Securitisation
- Securitisation Company : The minimum capital requirement is Rs.200 Crore at the time of registration, and these companies are required to maintain minimum capital adequacy ratio of 15% of total asset acquired or Rs.100 crore whichever is less. It is company registered under companies act 1956 for the purpose of securitisation. The company also needs registration with RBI.
- Security Agreement means an agreement, instrument or any other document under which security interest is created.
- Secured Asset means property on which security interest is created. The powers given by SARFAESI Act for enforcement of securities are against secured assets only.
- Secured Creditor
- Secured Debt means a debt which is secured by any security interest.
- Secured Interest – Any right, title and interest of any kind whatsoever upon the property created in favour of any secured creditor is called as secured Interest.
- Security Receipt
- Sponsor is a person holding not less than 10% of the paid up equity capital of securitisation company.
- When any bank or financial institutions creates a charge against property, with which authority the transaction will have to be registered under the SARFAESI Act, 2002 – With the Central Registry
- When the provisions of SARFAESI Act, 2002 can be invoked for proceeding against the charged property – When there is default in repayment and the bank declares the account as NPA.
- Acquisition of financial asset from the originator is the main function of securitisation company.
- If the borrower does not pay within 60 days after notice by the secured creditor the creditor can take possession of the security.
- Enforcement of SARFAESI Act only if security is not in possession of the bank and financial institution.