Home loan frauds up by a third
In ‘05-06, commercial banks reported 13,914 cases of frauds, involving a sum of Rs 1,381 crore.
By TNN |
MUMBAI: Intense competition in the fast-growing home loan business has resulted in banks falling victim to an increased number of frauds through creation of multiple mortgages on the same property. This has prompted the Reserve Bank of India (RBI) to ask state governments to set up a central mortgage register which will enable lenders to verify whether a property is mortgaged to any other lender.
In ‘05-06, the number for frauds has risen by a third over the previous year’s level. According to RBI, in ‘05-06, commercial banks reported 13,914 cases of frauds, involving a sum of Rs 1,381 crore as against 10,450 cases of frauds amounting to Rs 779 crore during ‘04-05. “Number and amount of frauds reported by banks increased significantly during ‘05-06. One of the major reasons for such a sharp increase in frauds was an increase in housing loan frauds,” RBI said. Frauds in areas of credit/debit cards and ATMs also increased. There have also been a frauds in IPO financing which was discovered last year. However, RBI did not divulge category-wise figures of bank fraud.
As regards multiple creation of equitable mortgages, banks are handicapped to verify the position of encumbrance as also genuineness of the title to the property since at present there is no institutional mechanism for banks to verify the existence of charge (equitable mortgage) on a particular property. “Analysis of frauds in the area of housing finance revealed the submission of fake or forged title deeds of properties, salary certificates, income tax returns by borrowers. Laxity in the conduct of due-diligence of borrowers and builders, absence of a system of pre-sanction visit to the project site and laxity in post-disbursement were some other contributory factors,” RBI added.
To overcome this problem, the central bank has brought to the notice of state governments and the Centre the need for maintaining record of creation of a charge by a bank on an immovable property at a centralised place so as to enable the lending institutions to carry out due-diligence before accepting a particular immovable property as a security. However, a very few state governments have initiated action in this regard so far.
In ‘05-06, the number for frauds has risen by a third over the previous year’s level. According to RBI, in ‘05-06, commercial banks reported 13,914 cases of frauds, involving a sum of Rs 1,381 crore as against 10,450 cases of frauds amounting to Rs 779 crore during ‘04-05. “Number and amount of frauds reported by banks increased significantly during ‘05-06. One of the major reasons for such a sharp increase in frauds was an increase in housing loan frauds,” RBI said. Frauds in areas of credit/debit cards and ATMs also increased. There have also been a frauds in IPO financing which was discovered last year. However, RBI did not divulge category-wise figures of bank fraud.
As regards multiple creation of equitable mortgages, banks are handicapped to verify the position of encumbrance as also genuineness of the title to the property since at present there is no institutional mechanism for banks to verify the existence of charge (equitable mortgage) on a particular property. “Analysis of frauds in the area of housing finance revealed the submission of fake or forged title deeds of properties, salary certificates, income tax returns by borrowers. Laxity in the conduct of due-diligence of borrowers and builders, absence of a system of pre-sanction visit to the project site and laxity in post-disbursement were some other contributory factors,” RBI added.
To overcome this problem, the central bank has brought to the notice of state governments and the Centre the need for maintaining record of creation of a charge by a bank on an immovable property at a centralised place so as to enable the lending institutions to carry out due-diligence before accepting a particular immovable property as a security. However, a very few state governments have initiated action in this regard so far.
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