SARFAESI Notification Widens Applicability for NBFCs

The Ministry of Finance (Department of Financial Services) has issued a new notification dated February 24, 2020 superseding earlier notifications dated August 5, 2016, August 27, 2018 and October 24, 2018, issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI’).

As per the new notification, registered non-banking financial companies (‘NBFCs’) with assets worth INR 100 crore or more now qualify as ‘financial institutions’ under SARFAESI, and are entitled to enforce security under SARFAESI for secured debts of INR 50 lakhs and above. This has significantly widened the number of NBFCs eligible to use SARFAESI as earlier only NBFCs with assets worth INR 500 crore or more that were specifically listed in the three superseded notifications were eligible to use SARFAESI for enforcement of security in relation to their secured debt where the principal amount of the debt was at least INR 1 crore.

Date: February 27, 2020