The Company specializes in undertaking outsourcing of entire procedure and legal actions as laid down under Chapter III of THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (in short referred to as SARFAESI ACT) and THE SECURITY INTEREST RULES, 2002. The Chapter III of SARFAESI Act deals with the second part of the act i.e. ENFORCEMENT OF SECURITY INTEREST (Sections 13 to 18A of the SERFAESI ACT, which deals with the procedures for issuing demand notices; taking symbolic and physical possession of the secured assets; valuation and sale of secured assets; procedure of sale; and security and management of the secured assets, etc.
The Company is empanelled with Most leading Public Sector Banks in India and the Company's operations are spread across the States.
The Company is engaged in this segment of outsourcing since inception of the SARFAESI Act. The process started with the education of constituent of the customer on the provisions and applicability of SARFAESI Act and identification of cases which could fall under the ambit of this Act.
During the journey of 5 years, the Company’s achievements can be enumerated as under:-
As recovery agents we work for a bank or a financial institution, engaged in recovering debts from defaulting customers across different kinds of loans, credit cards, auto loans, mortgages, etc.
We don’t work for banks or loan companies alone, any business or service where customers are required to make payments for goods or services received and fail to do so, in spite of several reminders or notices. For example, hospitals, retail stores, utility companies, etc are all services which use us to collect money on long-overdue payments. Other responsibilities we undertake are:
The company is also providing services as Auctioneers and Agents facilitating sales of secured assets seized by the lenders. Over the last seven years of activities, the Company has compiled a large database of persons interested in making the investments in assets on distress sale. The following procedure is adopted for faster sale and better realization of value of assets:
The Company has to its credit more than 100 successful auctions and sales. There is a dedicated team for management, publicity and marketing of assets under distress sale. The team is experienced enough to handle properties of any size. The documentation process has already been optimized and systemized resulting in better confidence of buyers, timely completion of transaction and faster recovery of dues.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) empowers Banks / Financial Institutions to recover their non-performing assets without the intervention of the Court. The Act provides three alternative methods for recovery of non-performing assets, namely: -
The provisions of this Act are applicable only for NPA loans with outstanding above Rs. 1.00 lac. NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.
Non-performing assets should be backed by securities charged to the Bank by way of hypothecation or mortgage or assignment. Security Interest by way of Lien, pledge, hire purchase and lease not liable for attachment under sec.60 of CPC, are not covered under this Act
The Act empowers the Bank:
If on receipt of demand notice, the borrower makes any representation or raises any objection, Authorised Officer shall consider such representation or objection carefully and if he comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate the reasons for non acceptance WITHIN ONE WEEK of receipt of such representation or objection.
A borrower / guarantor aggrieved by the action of the Bank can file an appeal with DRT and then with DRAT, but not with any civil court. The borrower / guarantor has to deposit 50% of the dues before an appeal with DRAT.
If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the following measures:
With an aim to provide a structured platform to the Banking sector for managing its mounting NPA stocks and keep pace with international financial institutions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was put in place to allow banks and FIs to take possession of securities and sell them. As stated in the Act, it has "enabled banks and FIs to realise long-term assets, manage problems of liquidity, asset-liability mismatches and improve recovery by taking possession of securities, sell them and reduce non performing assets (NPAs) by adopting measures for recovery or reconstruction." Prior to the Act, the legal framework relating to commercial transactions lagged behind the rapidly changing commercial practices and financial sector reforms, which led to slow recovery of defaulting loans and mounting levels of NPAs of banks and financial institutions.
The SARFAESI Act has been largely perceived as facilitating asset recovery and reconstruction. Since Independence, the Government has adopted several ad-hoc measures to tackle sickness among financial institutions, foremost through nationalisation of banks and relief measures. Over the course of time, the Government has put in place various mechanisms for cleaning the banking system from the menace of NPAs and revival of a healthy financial and banking sector. Some of the notable measures in this regard include:
The objective of SICA was to proactively determine or identify the sick/potentially sick companies and enforcement of preventive, remedial or other measures with respect to these companies. Measures adopted included legal, financial restructuring as well as management overhaul. However, the BIFR SARFAESI ACT 2002: An Assessment process was cumbersome and unmanageable to some extent. The system was not favourable for the banking sector as it provided a sort of shield to the defaulting companies.
The need for OTS arises due to the fact that whenever the recovery proceedings are initiated and legal notices are issued to recover dues from the defaulting borrowers, the defaulters in most of the cases obtain different kinds of stay orders from different Courts and the matter remains pending for a long time. During this period the lenders are not able to recover their interest/principal dues from such borrowers as the matter remains subjudice. In order to improve the recovery from all such cases and also from the chronic defaulters and in order to reduce the Non Performing assets (NPAs), the mechanism of OTS of dues was evolved.
There is an increase in tendency from banks to prefer one time settlement (OTS) as against enforcement of security interest or recovery through legal route. The trend is gaining momentum because of the tardy legal process involved.
The Scheme aims at One Time Settlement with the MSME NPA borrowers, where the exposure of the Bank is not more than Rs.25 lacs per borrower, to ensure speedy settlement of the accounts without going into long drawn recovery process.
Payment terms:
The amount of settlement is payable in one lump sum. In case lump sum payment could not be made, at least 25% of the settlement amount shall be payable as upfront and the balance amount of 75% be payable within 3 months from the date of acceptance of the OTS proposal by the Bank with interest @ IVRR (simple) from the date of settlement till the date of final payment.
Declared OTS Policies of Institutions (Commom Factors)- Standardization, No pick and choose poliy, transparency, eligibility (willful defaulters to be excluded), Deligation power (Decision making authority), maxizing returns & Minimizing costs, realizing value of the possessed security, commercial decision, options available to banks and the lenders
10.16 Subsequent to the introduction of the SARFAESI Act, 2002, the Reserve Bank issued fresh guidelines for one-time settlement scheme in January 2003 for compromise settlement of chronic NPAs up to Rs.10 crore in PSBs. These guidelines cover: (a) all NPAs in all sectors, irrespective of the nature of business, which have become doubtful or loss assets as on March 31, 2000 with outstanding balance of Rs.10 crore and below on the cut-off date; (b) NPAs classified as sub-standard as on March 31, 2000, which have subsequently become 'doubtful' or 'loss' assets; and (c) cases in which the banks have initiated action under the SARFAESI Act, 2002 and also cases pending before Courts/Debt Recovery Tribunals (DRTs)/Board for Industrial and Financial Reconstruction (BIFR), subject to consent decree being obtained from the Courts/DRTs/ BIFR. The last date for receipt of applications from borrowers under the scheme is September 30, 2003.
10.17 Guidelines for the special One-Time Settlement (OTS) scheme for loans up to Rs.50,000 to small and marginal farmers by PSBs were operative up to December 31, 2002. They were extended up to March 2003 in view of requests received from banks and the drought/flood situation in various parts of the country.
Lok Adalats
10.18 The Reserve Bank issued guidelines to commercial banks and FIs to enable them to make increasing use of Lok Adalats. They were advised to participate in the Lok Adalats convened by various DRTs/DRATs for resolving cases involving Rs.10 lakh and above to reduce the stock of NPAs.
Debt Resolution segment of our business has been helping corporate to discover debt relief for many years. From the first client we helped with debt settlement to the thousands of families now debt free since; we've grown to become the most trusted name in debt relief across the country.
Debt Resolution has developed relationships with every major creditor in India; valuable relationships saving you crores of rupees in outstanding balances when using our exclusive debt settlement service.
“Asset Reconstruction Company” (ARC) is similar to asset management company prevalent globally. It was proposed that the same be funded by resources from Central Government. This was to facilitate Banks to improve their balance sheets by cleaning up their non-performing loans portfolio. However, the same could not get implemented for various reasons. By keeping the original objective of asset reconstruction fund in mind and to give more emphasis on the reconstruction aspects, the term ARC has been used in India.
To alleviate the global issues of bad loans, Asset Reconstruction Companies have been set up in various countries of the world. Bad loans arise as part of banking operations or due to regulatory requirements or change in environment. There could be two possible ways to obviate the accumulation of bad loans.
1. Banks to manage their own bad loans by providing incentives, legislative powers, or special accounting or fiscal advantages.
2. Facilitate the management of bad loans by apex body through a specialised agency or agencies.
Both approaches have their own pluses and minuses and there is no empirical evidence to suggest which approach is better than the other. Across the world, various entities have tried either of the two approaches. There are success as well as failure stories for the above.
1. All advantages available for any centralized process
2. ARCs being the specialized agencies have NPA resolution as the core activity
3. Banks can concentrate on normal banking operations rather than dealing with sticky assets
4. ARCs as a Central agency acquires bad loans from Banking system by bringing in investors.
Enacting The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act 2002) and subsequent amendment by the Government of India has given birth to the Asset Reconstruction Companies in India.
MARC’s objective is to resolve the impaired assets. Banks and Financial Institutions are the major source for these assets. MARC acquires non-performing assets (NPAs) from them for a consideration so that Banks’ / Financial Institutions’ Books remain clean of NPAs and they can concentrate on their core business.
MARC has already acquired sizable NPAs from various Banks and Financial Institutions. Banks / Financial Institutions which are providing secured financial assistance to Companies, which have become stressed assets over a period of time, may consider transferring such stressed assets to MARC for effective resolution.
MARC deploys comprehensive and best possible capabilities required for resolving the NPAs acquired from Banks and Financial Institutions. MARC has a lean and flat structure with the objective of faster response time and focus on the core areas. Hence, MARC is building the required capabilities through outsourcing to the leaders in various fields on a collaborative basis.
The activities, which are outsourced in general are outlined below :
MARC engages the services of Valuers, specialised in valuing the assets and / or business of the borrower and also to confirm the validity and enforceability of the documents executed by the Borrower with the Selling Entities like Banks / Financial Institutions.
Resolution Agencies are engaged to carry out Resolution of Financial Assets and act as MARC’s Agent. They design and implement resolution strategies so as to maximise realisation. The Agent would be able to enforce all the powers under SRFAESI act, 2002 acting on behalf of MARC.
The Agency amongst other things is required to maximise realisation from the portfolio of Financial Assets, undertake negotiations with the borrower, investigate into the net worth and capabilities of the borrowers and guarantors, take possession of assets under SRFAESI Act and ensure its proper maintenance, preservation and protection, undertake liaison with various government and quasi-government authorities for disposal of assets/collaterals, represent MARC in any court of law or Debt Recovery Tribunal or any other agency for obtaining decrees/orders for disposal of assets as well as implementation of decree/order, recover money from sale of business or assets, which would include identifying buyers for the property under consideration.
Lawyers are engaged to represent MARCin Court of Law, Board for Industrial and Financial Reconstruction or Debt Recovery Tribunal or any other Authority, for obtaining decrees / orders for disposal of assets as well as implementation of decree / order.
Security Agencies are engaged for preservation and protection of the Financial Assets acquired by MARC
MARC acquires non-performing assets (NPAs) from the Banks / Financial Institutions / Others along with the underlying securities mortgaged and /or hypothecated by the borrowers to the lenders. The assets secured by the borrowers include manufacturing facilities like land, building, plant & machineries, current assets and collateral like personal properties.
With expertise in turnaround and with the local business network and with a vision of a stringer economy, we believe that NPAs will have to be managed strategically. Our approach to issues on borrower side is co-opt and take effective management participation to seek a turnaround and focus on core competencies, added with making the debt manageable with unique structures and resolving differences within the borrower community and lender and looking at a win-win situation for all the stake-holders. We have successfully made such transitions in all our assignments by looking at business perspective - newer markets, innovations and restructuring; structural perspective - mergers and acquisitions to see that both the parties gain.
We at MARC believe that openings lost are business lost. There are situations in modern business environments that demand enterprises to be agile and seek support for un-anticipated financial situation. For such special situations where opportunities should seldom be missed, MARC brings to the table innovative solutions to address the urgent needs of the business. MARC has proven track record of setting afloat a variety of distressed companies across medium and large enterprises to manage the crisis with various models of funding.