FLOW CHART - A

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002
PROCEDURE FOR ENFORCEMENT OF SECURITY INTEREST (SECTION 13 OF SARFAESI ACT)

Loan Agreement is
executed for the Loans includes
purchase of the any Advance or
asset refinance

Security interest Conditions to be fulfilled

is created on the 1.Debt due more than Rs 20 lacs
asset and it 2."Security Interest" means right, title, interest
becomes the created in favour of the creditor over the asset by
"secured asset" way of Mortgage or Charge or hypothecation or
assignment.
3.The security should not be in the form of
Agricultual Land.
Borrower 4.Amount due is more than 20% of the principal
commits amount and Interest thereon
default

Borrower's debt is
If Installments / debts are due
classified as NPA in the
for more than 90 days.
books of the Bank.

Notice sent by RPAD shall clearly specify

Bank issues notice a) the loan account of the Borrower is classified as
for the payment of the NPA
debt (Section 13 (2) b) the amount payable by the
OF SARFAESI ACT) Borrower
c) secured assets intended to
be enforced.
d) 60 days time for making payment

Customer admits Customer

liability and settles replies/raises
the dues objections

HLF drops
further Reply is Reply / Objections not
proceedings acceptable to justified / acceptable
HLF

End

Reply to be
issued within 15
days to
borrower

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2 60 DAYS NOTICE PERIOD EXPIRES

The copy of the HLF may decide to

notice and the HLF proceeds to take
a) take possession of the assets or
proof of service possession of the Asset
b) take over management or
RPAD should be c) appoint any other person to manage the
kept in file. affairs or
d) require any person who owes money to the
borrower to pay the same to the HLF.

Whether
possession of
asset be taken
NO
without the
intervention of the
Court
Application to DM/CJM or
before the Collector for taking
possession
Yes

Issue possession
notice under Sec The Court may appoint a
13(4) (as per rule 8 Receiver to take
in the form of given possession of the asset
in Appendix IV) or assist authorise us to
Refer Form A take possession with
Police protection

The Authorised
Officer of the HLF
The vehicle is entrusted
takes possession of
to the HLF's Authorised
the asset
Officer by the Receiver

Panchnama and inventory are drawn and

signed by Borrower and Authorised Officer
The copy of the
in the presence of two witnesses.
Inventory should
Simultaneously, paper publication should
be furnished to
be effected in 2 newspapers one in
the Borrower.
vernacular language

The repossessed asset

should be kept in the safe
custody of Authorised
Officer

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Valuation to be obtained
from an approved valuer
for fixing the reserve price
of the asset

Arrange sale of the
asset through any of
the 4 methods
METHODS:
1.Obtaining quotations from the
prospective purchasers
2. Inviting tenders from public
3. Holding Public Auction
4. Private Treaty

Pre-sale notice to be Simultaneously give a

issued to the paper publication in
Borrower giving 30 two newspapers, one
days time to settle the in English and the
dues other in the vernacular
language

Borrower No
settles the
dues

Asset to be sold and on

Yes receipt of the entire sale Sale Certificate
consideration sale is to be issued to
confirmed the Purchaser
Close the contract (Refer Form B)
and Issue NoC to
the Borrower after
the dues are
settled. If there is still balance
amount that is recoverable
after adjusting the sale
proceeds, Arbitration have to
be initiated

End