Applicability of SARFAESI Act for NBFC

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Applicability of SARFAESI Act for NBFC
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Applicability of SARFAESI Act for NBFC
SARFAESI act refers to The Securitisation and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2016.
The Ministry of Finance has notified 196 NBFC
companies which have been brought under the
definition Financial Institution under the
SARFAESI Act. This announcement comes after the
budget announcement in the year 2015-16 it has
allowed the applicability of SARFAESI to certain
NBFCs. SARFAESI Act is a legislation that helps
financial institutions to ensure asset quality in
many ways. It mainly helps in addressing the
problem of Non-performing assets. 
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Power of NBFCs and Banks under SARFAESI act

• Take possession of the assets which are
  hypothecated
• sell the assets which have been hypothecated If
  the borrower has already sold the asset to a
  third party, the third party can be ordered to
  surrender the asset
• With the significant changes that favour SARFESI
  act by 2016 amendment bill, the NBFC
  Companies are also brought up to the power of
  banks. These changes have been implemented to 196
  companies in total, which are systematically
  important Non-Banking Financial Company.

Related Difference between NBFCs and Banks
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Applicability of CERSAI
The new amendment of the act provides that
secured creditors would be unable to take
possession of the collateral unless it is
registered with the central registry under
section 26 D of the act. If the security interest
is not registered with the central registry and
the new security interest is made on the
hypothecated property, then the recent security
interest will prevail.
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NBFCs which are covered by SARFAESI Act

• 196 NBFCs which are notified by The Ministry of
  Finance on 5th August 2016
• All NBFCs having assets of more than Rs.500 crore
  according to their last audited balance sheet
• the Central Government informed certain NBFCs as
  public financial institutions under section 4A of
  the Companies Act,1956, such NBFCs are also
  allowed to exercise powers under the SARFAESI
  Act.
• The value of security created and the amount of
  loan in favour of any NBFCs for the amount of
  debt should not be less than 1 crore.

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