The Reserve Bank of India (RBI) wants securitisation of normal assets to be governed under a separate set of regulations and not within the scope of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. | |
| The central bank has suggested that securitisation of normal assets can be covered under a separate legislation or regulated by Securities and Exchange Board of India (Sebi) through amendments to Sebi Act or to Securities Contract Regulation Act. |
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| RBI is of the view that Sarfaesi Act should focus on asset reconstruction companies (ARCs) for dealing with impaired assets and their securitisation. |
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| RBI agrees with Indian Banks' Association's (IBA) demand that a provision be inserted in the Sarfaesi Act specifying the role of debt recovery tribunals (DRTs) and debt recovery appellate tribunals (DRATs), as the extant provisions are silent in regard to their roles while entertaining petitions or appeals against the action of secured creditors for enforcement of security interest. |
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| RBI is also of the opinion that the requirement of depositing 75 per cent of debt due for DRT to entertain an appeal should be accompanied by a clause that the appellate tribunal may reduce such amount to not less than 25 per cent of the amount of the debt. The Supreme Court had struck down section 17(2) of the act relating to depositing 75 per cent of debt due in the Mardia Chemicals case. |
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| RBI has pointed out that section 21 of the Recovery of Debts Due To Banks And Financial Institutions Act, 1993, contained a similar provision where the amount to be deposited with the appellate tribunal is 75 per cent of the debt due from the borrower, but the appellate tribunal had the powers to waive or reduce the amount to be deposited. |
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