The judgment has come as a great relief for the 1,540 urban cooperative banks, as a very large number of borrowers, who were wilful defaulters, were taking advantage of the ambiguity in interpretation of the SARFAESI Act by various courts and were not returning the loan amounts for years
The Supreme Court (SC) decision on the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act may help co-operative banks pursue bad loans.
Since the apex court has made the SARFAESI Act applicable for co-operative banks it will help lower non-performing assets (NPAs), BusinessLine reported.
An SC Bench, comprising Justices Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah and Aniruddha Bose, stated that co-operative banks qualify as a 'banking company' as specified under the SARFAESI Act, 2002.
Jyotindra Mehta, President, National Federation of Urban Co-operative Banks and Credit Societies (NAFCUB), said the law helps co-operative banks since the cost of litigation is often higher than the loan size.
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