‘CERSAI’ known as Central Registry of Securitization Asset Reconstruction and Security Interest of India has been established as a government company. It was formed for the purpose of operating a registration system mainly to safeguard the interest of lenders and property buyers. It aims to discourage the practice of taking out multiple loans from several banks using the same asset or property.
The banks and lending institutions are required to register the security interests created by them with CERSAI. The CERSAI website facilitates various searches such as Asset Based Search, Debtor Based Search, etc. on payment of a certain fee. In beginning, the facility was introduced for filing of security interests of immovable properties while later on the facility was extended for security interests created on other kinds of immovable, movables, intangible properties and assignment of receivables.
Before formation of CERSAI, both the banks and the property buyers faced some challenges while transacting due to lack of availability of relevant information. Some of the challenges faced are mentioned below:
1) Challenges faced by the banks – Mostly in equitable mortgages, it was observed that loans were taken from multiple lenders on the same property. So, due to such malpractices, the lenders incurred losses and a need was felt to design a system which can tackle this problem in an efficient manner.
2) Challenges faced by the buyers– Sometimes when the buyers purchases a property they were not aware of the existing loan on such property due to lack of information. So, they found themselves in a very difficult situation, as to whether the property under acquisition is free from any existing charge or not. It landed the potential buyers in trouble, when they acquired a property on which there was already an existing loan unpaid by their seller.
Therefore with a view to mitigate such problems and also to safeguard the interest of the lenders as well as the buyers, a mechanism was introduced by bringing CERSAI so as to provide relevant pool of information regarding the security interests created on the assets by the lender. This mechanism may be beneficial for the lenders and also the property buyers to effectively execute their transactions.
Summary
The concept seeks to enhance governance mechanism mainly in lending and security interest created from the viewpoint of the lenders as well as the property buyers. It facilitates more informed decisions of the parties involved in such transactions and may also be useful in ease of doing business.
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(Articles been updated on 15.08.2021)
