The Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act provides an enabling legal framework for banks and financial institutions to recover dues exceeding ~1 lakh by enforcing security interests against the borrower’s or guarantor’s secured assets without court or tribunal intervention.
Cersai is a central online database created by the Indian government to record security interests (mortgages/charges) over properties, preventing fraudulent multiple lending on the same asset by storing details of loans against immovable, movable, and intangible assets, increasing transparency in lending, and ensuring lenders can verify prior encumbrances.
One of the proposed changes seeks to explicitly empower the central government to issue directions to Cersai regarding its functioning, without affecting the powers already delegated to the Reserve Bank of India (RBI). At present, Section 20 of the Sarfaesi Act authorises the Centre to set up CERSAI, but does not clearly spell out its power to issue directions.
“On previous occasions, the absence of clearly defined powers of the central government led to confusion over oversight of the Central Registry,” a senior official said. “Cersai has now been notified as Critical Information Infrastructure, and explicitly stating the Centre’s authority to issue directions will further improve its governance and functioning,” the official added.
Officials said the broader objective of the proposed amendments is to streamline registration of security interests, strengthen creditor confidence, and improve India’s ‘ease of doing business’ indicators, particularly under the ‘getting credit’ parameter.
“These changes are aimed at ensuring smoother functioning of the Central Registry, and removing operational uncertainties that have emerged over time,” one of the sources said.
An email sent to the finance ministry remained unanswered till the time of going to the press.
The government is also proposing to amend the law to allow the central government to delegate its powers relating to the Central Registry under both Chapter IV and Chapter IVA of the Act to the RBI. While Section 20 currently permits delegation of powers to the RBI for establishment, operations, and regulation of the Central Registry under Chapter IV, the central bank has pointed out that it does not have regulatory powers over functions and obligations introduced under Chapter IVA.
Chapter IVA, inserted through a 2016 amendment, covers registration of transactions creating security interests by secured creditors and other creditors. “The RBI has highlighted that it has no explicit authority to regulate Central Registry functions envisaged under Chapter IVA. The proposed amendment addresses this gap,” an official said.
Another proposed clarification relates to the filing of transaction particulars with the Central Registry. Under Section 23, all transactions involving securitisation, asset reconstruction, or creation of security interest must be registered. However, some court interpretations of earlier amendments have led to ambiguity over whether the obligation to file particulars lies with the secured creditor.
The government now plans to clarify that the responsibility for filing such particulars rests with the securitisation company, reconstruction company, or the secured creditor, as the case may be. “This clarification is necessary to bring certainty on compliance obligations and avoid litigation,” the source said.
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