Q. Which of the following are the provisions of SARFAESI Act which enables banks to reduce their non-performing assets (NPAs)

1. Enforcement of Security Interest by secured creditor (Banks/ Financial Institutions).
2. Transfer of non- performing assets to asset reconstruction company , which will then dispose of those assets and realise the proceeds.
3. To provide a legal framework for securitization of assets.
4. Assisting banks in making the credibility track record of customers under Credit Information Bureau of India (CIBIL).

Answer: 1, 2 and 3
Notes: The correct answer is 2. The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) was enacted in 2002 to empower banks and financial institutions to recover their non-performing assets (NPAs) efficiently. 1. Enforcement of Security Interest: This allows banks to take possession of secured assets without court intervention, expediting recovery. 2. Transfer of Non-Performing Assets: Banks can transfer NPAs to asset reconstruction companies (ARCs), which specialize in managing and recovering distressed assets. 3. Legal Framework for Securitization: The Act provides a structure for securitizing financial assets, enhancing liquidity for banks. 4. CIBIL Credibility: While CIBIL helps assess creditworthiness, it is not a direct provision of the SARFAESI Act. Thus, options 1 and 3 are related but not direct provisions for reducing NPAs, making option 2 the most accurate.