Recovery of money by banks from the borrower can be done under SARFAESI Act. It involves a two-step process. Firstly, securitisation and reconstruction of financial assets; secondly, enforcement of security interest. Whenever, a bank gives financial assistance to a person, the assistance is termed as a loan to the borrow against any security. In case of default of payment by the borrower, a legal notice is served because of existence of security interest for repayment of debt. If the default persists, the security is sold off to Securitisation and Reconstruction Companies (SCOs and RCOs). The bank in turn receives money and its Non-Performing assets or NPAs are converted into liquid money.

The borrower now becomes the borrower of SCOs and RCOs. Further, in a different scenario, banks can even opt for enforcement of security interest in a debt recovery tribunal (DRT). A civil action for recovery of money is taken, wherein after the failure to comply with the legal notice, the Court is entitled to sell the security to recover money and to take other measures for the enforcement of this security interest.

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