Govt plans to amend SARFAESI Act to include special situation funds

The Union government is considering amending the SARFAESI Act, 2002, to expand the definition of a financial institution by including special situation funds (SSFs), a senior government official said on condition of anonymity.

- HARSH KUMAR

The SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002 provides an enabling legal framework for banks and financial institutions to recover dues exceeding ₹1 lakh by enforcing security interests against the borrower's or guarantor’s secured assets without court or tribunal intervention.

An SSF, as defined by the Securities and Exchange Board of India (Sebi), is a category I alternative investment fund (AIF) that focuses on distressed assets, stressed loans, and companies requiring restructuring. SSFs seek to profit from corporate turnarounds, financial distress, or special situations such as mergers and bankruptcies.

According to the official, the government is also planning to prescribe a definite time limit for borrowers to make representations against demand notices, fixing it at 30 days from the date of receipt.