Tools

SARFAESI timeline and the cost of delay

Lays out the statutory periods that follow a demand notice and puts a figure on what each month of delay carries.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, sections 13 and 14

The figures

Set to the worked example in the note. Figures entered stay in this browser: nothing is sent, nothing is stored.

Outstanding on the date the account became a non-performing asset (NPA) (INR)

INR 25,00,00,000

Contract interest (per cent a year)

Penal charges, not capitalised (per cent a year)

Secured property, value at the NPA date (INR)

INR 20,00,00,000

Erosion once the asset is idle and possession is contested (per cent a month)

Pre-deposit on appeal under section 18 (per cent of the debt)Fifty per centTwenty-five per cent, if reduced by the Appellate Tribunal

Rate at which the deposit is carried (per cent a year)

Result

INR 38,12,500 a month, on the figures entered

The cost of one month of delay, 1.53 per cent of the outstanding: dues of INR 28,12,500 and erosion of INR 10,00,000.

Contract interest: INR 25,00,00,000 at 11.5 per cent a year, for one monthINR 23,95,833 a monthAn assumption stated in the note, not a provision
Penal charges: 2 per cent a year, a charge and not capitalisedINR 4,16,667 a monthReserve Bank of India circular on penal charges, 18 August 2023
Dues accrual: interest plus penal chargesINR 28,12,500 a monthArithmetic on the lines above
Erosion of the secured property: INR 20,00,00,000 at 0.5 per cent a month, once idle and possession is contestedINR 10,00,000 a monthAn assumption stated in the note, not a provision
Cost of one month of delay: dues accrual plus erosionINR 38,12,500Arithmetic on the lines above
As a share of the outstanding1.53 per cent a monthArithmetic on the lines above
Sixty-day window after the demand notice, dues only: two months of the dues accrualINR 56,25,000Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 13(2)
Pre-deposit on appeal: 50 per cent of INR 25,00,00,000INR 12,50,00,000Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 18
The pre-deposit carried at 7 per cent a yearINR 7,29,167 a monthSecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 18; the carrying rate is an assumption stated in the note

60 daysfrom the demand notice, for the borrower to discharge the liabilitySecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 13(2)
15 daysfrom the borrower's representation, for the secured creditor to communicate reasons for not accepting itSecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 13(3A)
15 daysfrom confirmation of sale, for the balance price; extendable only by written agreement, and not beyond three months in aggregateSecurity Interest (Enforcement) Rules, 2002, rule 9(4)
45 daysfrom the date the measure was taken, for an application to the Debts Recovery TribunalSecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 17
30 daysfrom receipt of the order, for an appeal, with a pre-deposit of fifty per cent of the debt (reducible to twenty-five per cent for recorded reasons)Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 18

Interest and penal charges accrue at a twelfth of the annual rate each month, on the outstanding, without compounding. Penal charges are a charge and are not capitalised.
Erosion runs at the monthly rate entered on the value of the secured property at the NPA date. The note treats 0.5 per cent as conservative for process plant and too high for a standalone industrial plot.
The sixty-day window after the demand notice is counted as two months of the dues accrual, without erosion.
The pre-deposit is taken on the outstanding entered. The Act takes the lesser of the debt as claimed and the debt as determined by the Tribunal.
The periods listed below run from different events. This tool does not turn them into dates.

A figure returned here takes no account of the facts of any matter. It is information, not advice.