Difference Between Sarfaesi and DRT

 Know the real difference between Sarfaesi and DRT, and what makes them unique for financial institutions?


SARFAESI Act came into the picture to empower the financial institutions, including banks and NBFC, for recovering non-performing assets. It gets performed by three alternatives: securitisation, reconstruction, and the sale of collateral without court intervention. 


While talking about DRT, Indian banks and other financial institutions have been suffering to recover debts from defaulters. The procedure to recover from the debt was too cumbersome, and therefore a special tribunal DRTs (Debt Recovery Tribunals) came into existence. 


Both acts are paradigm shifts allowing financial institutions to take care of non-performing assets and debts and enable the smooth flow. 


However, many individuals are confused since there is a thin line of difference between Sarfaesi vs DRT. 


In this article, let us know in detail what to expect from the same and how it contributes to India’s financial institution. 

What is Sarfaesi Act?


The act has five significant parts of consideration.


  • Regulations of the Act

  • Enforcement of Security Interest

  • Central Registry

  • Registration by Secured Creditors and Other Creditors

  • Offences and Penalties


This act came into the picture on 17th December 2002 for helping Indians recover their dues quickly. 


The act caters to directly auctioning properties or commercial spaces pledged to recover borrowers' loans. Before the show came into existence, financial institutions had to reach out to the civil court for help recovering dues legally. 


Visit GetlegalIndia and learn about the Sarfaesi act and how does it work.



According to this law, if a borrower fails to pay the dues, financial institutions have the power to take strict control of the same. This procedure helps banks save time and choose easier ways to recover dues without going to civil court. 


  • It empowers the bank to issue notice to the act of the borrower

  • It also powers to recall the entire loan advance and

  • Bring the pledged asset in an auction.


If in case, the borrower fails to comply with the notice, the bank may take the following action.


  • Take possession of the asset and

  • Sell, lease or assign the asset 



The provision of this act applies to outstanding loans beyond 1 lakh INR and get declared as Non-performing assets.

What is DRT?


When talking about DRT, there are many things to keep in mind. The RDB Act, 1993 provides for establishing Debts Recovery Tribunals (DRTs). It was to ensure speedy debt recovery is possible for banks by their customers. 


Also, The Tribunals power is often restricted to settle such cases of restoration of the unpaid amount from NPAs. At the same time, the banks declare the details by the banks under the RBI guidelines strictly. 

How Does It Differ? 


Sarfaesi act gets enacted in addition to DRT, and there are a few key differences you should know. 


  • Debts are recovered under the RDB Act by quasi-judicial entities known as Debt Recovery Tribunals. In contrast, under SARFAESI, collateral security can be retrieved by the bank/NBFC without the need for a court or tribunal.

  • Any debt can get recovered under the RDB Act. SARFAESI, on the other hand, allows for the recovery of only secured debts, i.e. debts backed by underlying assets.

  • The minimum amount of debt to approach a DRT is 20 lakhs. In contrast, the minimum debt amount recoverable under SARFAESI is one lakh rupees.

Now that you know the significant differences between Sarfaesi and DRT, it is easier to understand what to expect. As a financial institution, you have various powers and expectations regarding recovering dues. Knowing the fundamental differences will make identifying what gets expected from you, position and powlegaer, and more. 

Conclusion 

This article is sure to help you clear a lot of differences between Sarfaesi and DRT. Now that you know how it is distinguishable, you can take appropriate action. 

If you want to learn more about the topic, you can research it at GetlegalIndia.com. Get more information and read the informative articles to help you right action on borrowers and recovering dues. Visit GetlegalIndia.com and learn everything you can about the legal world! 

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