RBI wants local banks to address the issue of rising cases of frauds in the mortgage market

Banking regulator Reserve Bank of India (RBI) wants local banks to address the issue of rising cases of frauds in the mortgage market. RBI, according to banking sources, has raised concerns relating to inappropriate valuations with the Indian Banks’ Association (IBA). The regulator wants banks to look at this issue from a holistic perspective.

IBA is now looking at issuing a policy document to highlight the selection norms for banks appointing independent valuers. Considering that banks need to migrate to Basel II standards in the next few months, periodic valuations of assets are gaining greater significance. RBI has indicated to IBA that in the recent past, there had been several instances where banks had opted for valuers who were offering services at lower costs. But some of these valuers have misled banks, thus impacting the quality of assets.

Industry sources point out most banks typically look at the panel of valuers approved by the Income Tax department for evaluating individuals paying wealth tax. However, the institution of valuers is not a statutory body like ICAI, although a legislation aimed at creating a similar body for valuers is on the cards.

A senior official from IBA said, “Talks are at a preliminary stage, we will be putting down criteria based on which banks can appoint valuers. Also, we may appoint our own panel of valuers for properties whose value exceeds Rs 50 crore.” In its communication to IBA, the central bank also cited instances of many document-related frauds. Tamil Nadu has set up an online mortgage loan registry and Andhra Pradesh is also planning to follow suit.

IBA is now in talks with the Credit Information Bureau of India (CIBIL) to develop a common database on frauds detected by banks in the industry. Sources added with increasing availability of reprinting machines (colour xeroxes), it is possible to secure exact replicas of documents. Especially, in cases where the property is still under construction, it is difficult for valuers to verify the physical existence of the property. Read more from: indiatimes.com