In a bid to overcome the menace of home loan frauds, the Indian Banks’ Association (IBA) proposes to set up a committee to work out the modalities for establishing a central electronic registry that will list all mortgages created by deposit of title/sale deeds with banks.
Though the establishment of a central registry has been envisaged under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002, the proposal, somehow, had escaped the attention of law-makers as well as bankers.
With banks regularly falling prey to frauds being committed in home/ mortgage loans using fake sale/title deeds, the IBA committee, to be headed by the National Housing Bank Chairman & Managing Director , is expected to fast track the matter relating to the registry.
Less scope to cheat
According to Mr M. R. Umarji, Chief Advisor (Legal), IBA, once the registry is established, banks can verify the mortgage status of a house/property and accordingly take a decision on sanction or otherwise of a loan. “The registry would make it almost impossible for borrowers to get away by offering the same collateral/ security to take loans from various banks,” he said.
For a small fee, banks as well as those intending to purchase house/property can run a check with the proposed centralised electronic registry to verify whether a notice regarding the house/property has already been filed.
As the e-registry is envisaged as a repository of title holdings through e-filing of notice about the collateral/security, banks, once they are satisfied about the clarity of the title with respect to the collateral/ security being offered by a prospective borrower, will be encouraged to take faster credit decisions and may even charge lower interest rates.
Rs 600-cr loss?
The need for setting up a centralised registry assumes importance because between 2002 and 2006, when the economy was buoyant, 28 public sector banks cumulatively reported home loan frauds to the tune of around Rs 600 crore. This was disclosed by Reserve Bank of India in a reply to an application made under the Right to Information Act,
Bankers say that if one considers the PSBs’ home loan push in 2007- 2009, the home loan fraud could be in the region of Rs 1000 crore. The situation would be worse in the case of new generation private sector banks, which of late are showing an increasing interest in the home loans front.