We have filed a stay application in DRT against M/s Religare Finvest Ltd., for its DM order under SARFAESI ACT for possession. 1. M/s Religare is not an entity as a Financial Institution, it is only a NBFC & sanctioning property loans. We got loans from M/s Religare to swap CC limits of B.O.B in 2016 2. RBI once suspended M/s Religare's license to lend to Industrial Units. We want to know: Is Religare eligible to approach the DRT court under SARFAESI act? Please see M/s Religare's approach to SBI to solve its own NPA problems. Please advise what our action should be at DRT Court.
The case had been filed in DRT in 2018. At that time NBFCs were not allowed to leverage the SARFAESI Act. After the Financial Budget 2020 they were allowed.
Any financial institution including NBFC are well covered under the act to move to DRT for loan recovery process.
So Religare can approach DRT.
You can apply for stay. Your claim should be supported by a viable rescheduling plan of repayment of the loan amount. Rest is at the discretion of the DRT.
Religare is eligible to approach DRT court under SARFESI act
2) approach Religare for settlement of loan under OTS scheme
The Finance Ministry, Government of India has in the exercise of its powers under SARFAESI Act, 2002 (Further amended by SARFAESI Act, 2016) has notified on August 5, 2016 that 196 NBFCs are included under the definition of Financial Institutions as per the aforesaid Act. It was a major step in bringing out the NBFCs at par with the banks, focusing the manner in which recovery actions were taken by the NBFCs prior to this notification.In addition to 196 NBFCs covered under SARFAESI act, NBFCs notified as Public Financial Institutions by the Central Government, were also brought under the purview of the SARFAESI Act to exercise their powers.
If the license is still suspended then they will be barred to approach otherwise they can
The budget has proposed to ease the eligibility criteria for non-banking financial companies (NBFCs) for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act 2002 to asset size of Rs 100 crore, down from Rs 500 crore, and loan size of at least Rs 50 lakh against existing Rs 1 crore
Not many non-bank lenders are expected to use the Sarfaesi Act provisions to recover debt despite the Union budget making this route accessible to more such lenders due to time-consuming administrative hurdles as well as high loan ticket limit.
NBFC’s which are covered by the SARFAESI Act are:
The threshold set for other financial institution under the SARFAESI Act is Rs. 1 lakh only.
You may confirm tht whether Religare comes under the above ambit.
If it has been allowed then you cannot do anything about it.
According to the recent amendment, a secured creditor can initiate proceedings under SARFAESI even if there is current proceeding going on with a different authority. The only thing which the secured creditor needs to do before filing an application under SARFAESI is to file a leave of absence with that particular authority.
Bringing NBFC’s under the purview of SARFAESI act has brought in the much-needed reform for them. This amendment was done to bring parity in the regulation of NBFC with the other financial institution.
This amendment has solved the problem of NBFC’s by improving the recovering capability of the NBFC’s. NBFCs can now enjoy the benefits that were applicable only to banks.
Clarification: Religare Finvest is still having a valid NBFC license. So yes, they can leverage the SARFAESI act. Kindly suggest us an approach for OTS. Religare itself is asking SBI for a 49% haircut to settle its dues, for which SBI has agreed given that the TCG group buys the stake in Religare Finvest Ltd.. We have had meetings with Religare for OTS many times as well but they are not interested at all to have a discussion below the principal amount. Can you suggest another way for the OTS? In general, how much % haircut can we be optimistic about?
NBFC would not settle for less than principal amount as it has collateral security
2) if interest and penalty is waived accept the offer
OTS is mutual settlement process. You can not be settled unless other party agrees upon it.
SARFAESI Act:U/S 17 Aggrieved can approach DRT.
Agreeing for OTS is the discretion of the NBFC which cannot be forced on them by the borrower.
There is no specific formula or any provision in law to make them agree for any kind of haircut or even to agree for waiver of interest.
It is a reconciliation process through court or out of court which would bring any relief or remedy to bring an end to the crisis.
You may try to contact the top official of the NBFC to look for any possibilities as desired if the lower level officers do not cooperate or pay heed to your request.
There is no other way you need to confront them for OTS.
1. Yes NBFC is eligible to approach DRT under SURFAESI act.
2. You should try to settle the loan before the order of DRT.
3. OTS is scheme issued by lender time to time so you have to wait for next OTS scheme for settlement of loan.
