With banks facing increasing frauds in connection to home loans with fake sale or title deal, the Indian Banks' Association (IBA) is planning to set up a committee to work on a modal that will establish a central electronic registry to list all mortgages extended by depositing the sale deeds with banks.
The central registry will be visualized under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002.
The IBA Chief Advisor (Legal), M. R. Umarji said that after the registry is established under SARFAESI, banks will be able to view the mortgage status of a property and accordingly take a decision on the disbursement of the 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.
Both banks and those planning to buy the property can check with the proposed centralized electronic registry to verify if a notice regarding the property has already been filed or not at a very nominal charge.
The e-registry will store the information of title holdings regarding the collateral and after the banks are satisfied with the provided information, they will forward the lines of credit and also charge lower interest rates from the prospective borrower.
PSU banks in the industry have been continuously reporting a rise in the number of home loan frauds to the tune of nearly Rs 600 crore between the 2002 and 2006. Thus the need for an e-registry came up and this requirement was revealed by the RBI in a reply to an application made under the Right to Information Act.
Also the number of home loan frauds kept increasing and reached to around Rs 1000 crore during 2007-09.
The IBA committee formed for the purpose will be headed by the Chairman and Managing Director of the National Housing Bank.