Page 16 - Banking Finance May 2020

CO-OPERATIVE BANK NEWS

CO-OPERATIVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

How SC ruling on Sarfaesi session of the property or mortgaged In the absence of Sarfaesi Act, lenders
assets after giving the borrower a 60- had to resort to filing a case in civil
Act may benefit depositors day notice. Lenders can take over the courts, which was a lengthy procedure.

of co-operative banks physical possession or control the mort- Lenders also use other means to re-
Until recently, there was no clarity on gaged asset and can sell or transfer cover their dues from borrowers. They
whether co-operative banks could ini- them to a buyer without the interven- can approach a debt recovery tribunal
tiate action against borrowers under tion of any court or a third party. Once (DRT) and get what is called a recov-
the Securitisation and Reconstruction the property is auctioned, the lender ery certificate. It allows lenders to
of Financial Assets and Enforcement of deducts its dues and pays the rest of take possession of properties of bor-
Security Interest Act, 2002 (Sarfaesi the funds, if any, to the property rowers anywhere in the country and
Act). The apex court has ruled that the owner. sell them to recover dues.
Act will apply to co-operative banks as
it does to commercial banks. Before taking the physical possession, J&K State Cooperative
some lenders take symbolic possession Bank scam accused ar-
The Sarfaesi Act helps lenders to re- of the property. It means that a bank
cover their dues faster. "It is applicable or a financial institution does not have rested
only to secured loans and allows lend- the key to the property. The borrower In Rs 223 crore land scam of Jammu
ers to auction the property that is or the defaulter continues to occupy and Kashmir State Co-operative Bank,
mortgaged with them to recover dues the property. the Anti Corruption Bureau has ar-
from borrowers who have turned in rested Hilal Mir, Chairman of Jhelum
non-performing assets (NPA)," said Earlier there was confusion whether Cooperative House Building Society and
Satyam Kumar, CEO and co-founder of co-operative banks could use it because recovered an amount of Rs 187 crore,
Loantap, an online loan platform, in some states the high court had ruled siphoned by him.
which also has a non-banking financial that it does not apply to them and in
company (NBFC) license. some others, high courts had said that After his police remand, the accused
it's applicable. The Supreme Court has was today presented before the court,
Kumar points out that Sarfaesi is appli- now settled the dispute. which sent him to jail. The interroga-
cable to home loans, loan against prop- tion of the accused person has led to
erty and loan against collateral that Some co-operative banks that were put further leads in the matter and more
micro small and medium enterprises under the RBI restrictions could not arrests are likely as the investigation
(MSME) avail. initiate recovery action under the progresses in this case.
Sarfaesi Act, which they can do now for
Under this Act, a lender can take pos- faster recovery. A Preliminary Enquiry (PE) was con-

16 | 2020 | MAY | BANKING FINANCE