Banking · Non-Performing Assets
A retail loan customer fails to pay three consecutive monthly installments on a secured home loan. As per RBI guidelines, when the loan reaches 90 days past due (DPD), it becomes a Non-Performing Asset (NPA). If the bank initiates recovery under the SARFAESI Act, 2002, which procedural step is mandatory before taking physical possession?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank must issue a mandatory notice under Section 13(2) of the SARFAESI Act, allowing the borrower 60 days to repay the dues before proceeding with the enforcement of security interest under Section 13(4).✓
- 2The bank must explore recovery through Lok Adalat before proceeding with any formal statutory recovery mechanism.
- 3The bank is mandated to first file a suit with the Debt Recovery Tribunal (DRT) before attempting physical possession.
- 4The SARFAESI Act can be invoked immediately upon default without issuing any mandatory notice under Section 13(2).
Correct answer
The bank must issue a mandatory notice under Section 13(2) of the SARFAESI Act, allowing the borrower 60 days to repay the dues before proceeding with the enforcement of security interest under Section 13(4).
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