Home loan frauds haunting public sector banks

Home loan frauds haunting public sector banks
The Hindu Business Line, February 24, 2009, Page 1

HITTING THE ROOF.
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Humongous amount
Bankers say that if one considers the PSBs home loan push in 2007, 2008 and 2009, the home loan fraud could now be in the region of Rs 1,000 crore.
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K. Ram Kumar, Mumbai, Feb. 23

When the economy is in fine fettle, banks develop the proclivity to let their guard down.

The proof: between 2002 and 2006, when the Indian economy was shining bright, 28 public sector banks (PSBs), according to Reserve Bank of India’s reply to an application made under the Right to Information Act, cumulatively reported home loan frauds amounting to Rs 599 crore.

This figure, however, does not reveal the full picture as details pertaining home loan frauds in the new generation private sector banks are not available. The rot in these banks could be deeper considering that they went overboard during the period; peddling home loans to all and sundry with the promise of soft interest rates and high loan-to-value ratio, which sometimes exceeded 100 per cent of the property value.

Bankers say that if one considers the PSBs home loan push in 2007, 2008 and 2009, the home loan fraud could now be in the region of Rs 1,000 crore. The situation would be worse in the case of private sector banks, which of late are going slow on home loans.

Banks have reported that frauds have been committed in home/mortgage loans using fake title deeds/inflated valuation reports.

Builder-borrower-advocate-chartered accountant nexus is believed to be the root cause of banks falling prey to home loan frauds. In view of this problem, the Indian Banks’ Association has come out with a procedure for lodging complaints with the Institute of Chartered Accountants of India and State Bar Councils on malpractices/professional misconduct committed by erring chartered accountants/advocates in their dealing with banks.

What is baffling bankers is that the same flat is sold by some unscrupulous builders many times over, with the banks left holding the empty bag. For instance, a flat in Navi Mumbai was financed by around 20 banks involving a fraud of Rs 1 crore. Then, there is the case of a single borrower duping 27 banks to the tune of Rs 8 crore for buying flats across Mumbai.

“Bank officers are facing the music on the home loan front because of the dereliction of duty by some advocates and chartered accountants. Officers strictly go by their advice while sanctioning/disbursing loans. When a fraud comes to light, bank officials are either chargesheeted or summarily dismissed or put behind bars. However, no action is taken against the professionals,” said Mr. S Nagarajan, Deputy General Secretary, All India Bank Officers’ Association.

The sub-registrar’s office, according to Mr. Rajan Chandorkar, President, AIBOA (Maharashtra), registers ‘sale agreements’ without even verifying whether the property in question has been sold earlier. In 2006, the number of fraud cases reported was 620 aggregating Rs.167.43 crore.