SC places Cooperative banks under SARFAESI Act

The Supreme Court of India recently pronounced its judgement that cooperative banks shall be placed under SARFAESI Act.

Highlights

• The Supreme court has upheld the GoI notification dated January 28, 2003 under which the cooperative societies have come under SARFAESI Act. 
• The Apex court has also ruled that the Cooperative Banks have also come under the definition of banks under Banking Regulation Act, 1949.
• The Court has also ruled that under Sarfaesi Act, the Parliament has powers to provide procedures for recovery of loans under the act.

Sarfaesi Act

• Sarfaesi Act is Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. 
• The banks utilize the act as tool to reciver bad loans, especially the non-performing assets.
• The act provides procedures to transfer Non-Performing Assets for reconstruction of assets. 
• It also enforces security interests of the banks without intervention of the court. 
• In order to recover a debt, the act empowers the financial institutions in India to take over immovable property.