RBI against PPP model for central loan registry

Vrishti Beniwal

The Reserve Bank of India (RBI) has expressed
its reservations on the government’s proposal
to set up a computerised central registry for
keeping records of loans mortgaged against
securities in a public private partnership (PPP) mode.


The banking regulator is of the view that a
government official should head the registry
and that a PPP model will not be suitable
for running it.

The registry, once operationalised, would
help check frauds in the sale and mortgage
of properties by providing details to the
bank or the buyer at the click of a mouse.
“Both the Indian Banks’ Association (IBA)
and the finance ministry are proposing PPP
for the registry. However, RBI has some issues
on the way we want to structure it. So, we have
suggested that it could be a special purpose
vehicle (SPV) headed by a government servant,”
said a senior government official.

IBA’s chief legal advisor MR Umarji said as
the database would be similar to a corporate
registry, private sector participation
would bring in the expertise required to
handle electronic records.

The registry is proposed to be implemented
in two phases. In the first phase, all the
securities of banks will be registered to
help the lenders verify the documents while
giving loans against properties.

In the second phase, the registry
will provide a link to the database
of state governments and municipalities.
A customer planning to buy a house will get
the details about the property by paying a small fee.
Work on the first phase has already started.
And, states like Karnataka, Tamil Nadu,
Andhra Pradesh, Madhya Pradesh and
Maharashtra have even begun computerising
their records in preparation for the second
phase. The concept of a central registry was
introduced in the Section 20-26 of the SARFAESI
(Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest) Act.
The Act came into force in 2002, but the government
has not yet notified the above sections on
establishing the registry.

A central registry is maintained in most
countries. In India, the absence of such
a registry has led to borrowers taking loans
from other banks using duplicate title deeds.
Also, there have been complaints of banks
losing the deeds and/or not returning the same
in case there is any other loan outstanding.