Assignment Of NPA - Sarfaesi Act Vis-À-Vis Insolvency And Bankruptcy Code, 2016

Rajni Yadav, PHD Scholar, RMLNLU

ABSTRACT

In India, Banking sector plays a very important role in the development of the country. The income of the bank is generated through the interests on the loans and advances provided by them. So, whenever these loans or advances cease to generate income then they are called Non Performing Assets which are a kind of liability on the bank because if the banks will engage in handling these NPAs then their core business will get disturbed. So, in the year 2002, SARFAESI ACT was passed under which legal recognition were given to Asset Reconstruction Companies. ARCs were responsible to buy these NPAs from banks, manage them and then finally sell them. So, this was the recovery mechanism but still by this Act recovery rate was not good. So, need was felt to have one comprehensive Act. Therefore, Insolvency Bankruptcy Code was passed in the year 2016. Under this the main focus was on the revival of these stress assets which was done by resolution plan. Since time bound recovery mechanism was followed in IBC therefore leading to higher recovery rates than previous statues.