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Enforcement of Security Interest (SARFAESI) Act, 2002 – The Act empowers Banks / Financial Institutions to recover their non-performing assets without the intervention of the Court, through acquiring and disposing of the secured assets in NPA accounts with outstanding amount of Rs. 1 lakh and above. The banks have to first issue a notice. Then, on the borrower’s failure to repay, they can:

1.Take possession of security and/or.
2.Take over the management of the borrowing concern.
3.Appoint a person to manage the concern.



  • i will explain it in layman term... of whatever i can understand

    i have taken a load for my company from a bank, i have repay the loan and interests within a time frame... there are guidelines which determine how many days after i would default on payment after the deadline would my loan be classified as NPA (if im not wrong its 90 days after default)

    anyways, i have taken loan, im not able to repay..so the banks classify my loan as NPA.
    now they want to recover from me all the amount..

    so what can they do?

    1. send me notices and ask me to repay, which i may or may not reply to (depending on my political contact or stubborness to wither or simply brazeness to run away from country like mallya)

    2. while taking loan from a bank, i would have to offer a security over which bank would grant me a loan, in a still more layman term, if i ask for a loan, bank wont simply give me money, bank would give me loan over some asset or security which would be equivalent to the amount of loan or atleast upto certain % of the loan amount so that bank officials are satisfied they are not giving a loan to a nobody, and i do have a capacity to give back by selling my assets which i have offered as collateral. That security which i would have offered would be liquidated and amount recovered if its under NPA.

    3. now since i had my own company which ran into losses, maybe because of poor management decisions or my own fraud, that entity for which banks had given loan is itself under bank now. So they would be empowered to appoint management by removing (or not) old decision makers and move the company in the direction which would move it towards profit. Here bank officials wont come and sit on company board and start making decisions but professionals who know their stuff would be appointed. (for this read debt recovery tribunals /professionals in recently passed bills)

    4. appointment of person to manage the concern is almost same as above.

    iam sorry if i would have written something irrelevant or not understandable stuff but this is all i could...and so i cannot answer any supplimentaries..Thanks for reading. :|
  • In 2010, Basel III guidelines were released. These guidelines were introduced in response to the financial crisis of 2008.

    A need was felt to further strengthen the system as banks in the developed economies were under-capitalized, over-leveraged and had a greater reliance on short-term funding. Too much short-term funding makes the banks prone to risks. Banks generally rely on short-term funding because it is profitable.

    Also the quantity and quality of capital under Basel II were deemed insufficient to contain any further risk. This was because the banking system was growing. The world economy was growing too. Hence, what is sufficient earlier was not sufficient now.

    Basel III norms aim at making most banking activities such as their trading book activities more capital-intensive. The guidelines aim to promote a more resilient banking system by focusing on four vital banking parameters viz. capital, leverage, funding and liquidity.

    Again we need not go in technicalities, just the broad picture.

    This is how it was broadly done.


    The capital requirement (as weighed for risky assets) for Banks was more than doubled. ( e.g. 4.5% from 2% in Basel-II accord for common equity)


    Leverage basically means buying assets with borrowed money to multiply the gain. The underlying belief is that the asset will return the investor more than the interest he has to pay on the loan.

    Obviously doing so is risky business. Thus the Basel III puts a limit on the banks for doing this. The numbers are not important here. Getting the concept is important

    1. ques why short term funding is risky?
    2. what is meant by capital and leverage?
  • 1. ques why short term funding is risky?

    I think you need to re read what you have posted, it says "too much " short term funding, i think a simple understanding of 2008 crisis would suffice to understand this point. In anycase, short term funding, micro funding involves larger servicing costs. Short term funding is usually sought for non-capital consumption, which in itself is frought with risks, so that might answer the query.

    as for capital and leverage , answer is what u have already pasted
  • NPA = RG (Now understand clearly?) :D
    Dead and departed general caste player. RIP.
  • not getting clearly capital and leverage?
  • okay...
    i think its fairly simple.... B)
  • what is sovereign debt mgt? not getting it on googling
  • what is sovereign debt mgt in india? not getting it on googling

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