The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
Administered Ministry: Ministry of Finance / Department of Financial Services
Act details
| Short title | The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 |
|---|---|
| Long title | An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interests created on property rights, and for matters connected therewith or incidental thereto. |
| Act number | 54 of 2002 |
| Act year | 2002 |
| Enactment date | 17 Dec 2002 |
| Ministry | Ministry of Finance / Department of Financial Services |
| Department | Department of Financial Services |
| Jurisdiction | Central (Parliament of India) |
| Sections | 61 |
| Schedules | 1 |
| Status | Not repealed |
| Last checked on India Code | 29 Oct 2026 |
| Source | India Code, Government of India |
Summary
Summary of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
Key Provisions
1. Establishes a Central Registry for security interests
2. Asset Reconstruction Company (ARC)
• Definition: Company registered with the Reserve Bank for asset reconstruction/securitisation
• Functions:
• Acquire financial assets from banks/financial institutions
• Act as agent for recovering dues, manager, or receiver
• Resolve disputes through conciliation/arbitration
• Regulations:
• Registration with Reserve Bank
• Operational guidelines and penalties
2. Enforcement of Security Interest
• Procedure: Secured creditors can take possession of secured assets
• Assistance: Role of Chief Metropolitan/District Magistrate
3. Regulatory & Oversight
• Reserve Bank's Role: Policy determination and directions
• Penalties: For non-compliance
• Central Registry: For security interests
4. Dispute Resolution & Legal
• Mechanisms: Conciliation/Arbitration
• Amendments: To other enactments (e.g., Sick Industrial Companies Act)
• Penalties: Criminal and financial for offences
Legislative history
Legislative History:
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI),2002
Act Title The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
Act Number 54 of 2002
Act ID (India Code) 200254
Presidential Assent Date December 17, 2002
Enforcement Date June 21, 2002
Administrative Nodal Ministry Ministry of Finance
Precedent & Historical Context
1. High Non-Performing Assets (NPAs) & Pre-Existing Legal Bottlenecks:
o Prior to 2002, financial institutions in India had to rely primarily on civil suits or Debt Recovery Tribunals (DRTs) established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI).
o Civil courts and DRTs suffered from severe litigation delays, preventing banks from seizing and realizing collateral security without prolonged judicial intervention.
2. Expert Committee Recommendations:
o Narasimham Committee II (1998): Recommended the enactment of a dedicated law empowering banks to enforce security interests without court intervention and establishing Asset Reconstruction Companies (ARCs).
o Andhyarujina Committee (2000): Drafted specific statutory proposals enabling secured creditors to take possession and sell secured assets directly upon default.
Parliamentary Trajectory & Promulgation
• June 21, 2002: The President of India promulgated the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 (Ordinance No. 2 of 2002) to give immediate effect to recovery measures.
• Enactment: Received Presidential Assent on December 17, 2002.
• Enforcement: Enforced on June 21, 2002.
Source: Official Records of Parliament, India Code, and Ministry of Finance (Department of Financial Services).