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Explore the need and provisions for setting up a registry of mortgages, as well as the role of SARFAESI Act. Learn about the recommendations made by the IBA Working Group.
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Central Electronic Registry Meeting of the CEO’s of HFCs, Banks & RRBs National Housing Bank New Delhi March 17, 2010
Central Electronic Registry • Need for a Registry of Mortgages • Provisions for setting up of a Registry • SARFAESI Act Central Registry [ I, II, III] • IBA Working Group [ I, II] • IBA WG Recommendations [I, II] • Further Developments
Need for a Registry of Mortgages • Mortgage by deposit of title deeds (equitable mortgage) provided by section 58(f) of the Transfer of Property Act, 1882 is not required to be registered and there is no requirement of recording any written document for creation of such mortgage. • Taking advantage of this situation, a number of frauds have taken place by depositing multiple documents of title relating to the same property.
Provisions for setting up of a Registry • The Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) contains provisions for setting up a registry for registration of transactions relating to • Securitisation of Financial Assets, • Reconstruction of Financial Assets and • Creation of Security Interest.
SARFAESI Act Central Registry I • SARFAESI Act 2002 [Chapter IV] • Sections 20, 21, 22 [Central Registry, Central Registrar and Central Register] • GOI may by notification set up or cause to be setup the Central Registry • GOI may by notification appoint Central Registrar • Central Register shall be kept at the head office of the Central Registry under the control and management of Central Registrar.
SARFAESI Act Central Registry II • SARFAESI Act 2002 [Chapter IV] • Sections 23, 24, 25 • Filing of transactions of securitisation, reconstruction and creation of security interest • Modification of security interest registered under the act • Reporting of satisfaction by Securitisation company, reconstruction company or secured creditor • Section 26 • Right to inspect particulars of securitisation …
SARFAESI Act Central Registry III • SARFAESI Act 2002 [Chapter IV] • Section 31 • Not applicability of the act to ….. (h) financial asset not exceeding Rs. 1 lakh, (i) security interest created in agricultural land, and (j) when amount due is less than 20% of principal plus interest • Section 38 • Power of Central Government to make rules … • Section 39 • Provisions of section 21(2-4), 22 – 27 to apply after Central Registry is set up
IBA Working Group • The need for a registry of mortgages and the possibility of setting up a registry under the SARFAESI Act required further examination to prepare firm ground for creation of Central Registry • For this purpose at the instance of the GOI a Working Group was set up by Indian Banks Association in January 2009 under the chairmanship of Mr. S. Sridhar, CMD National Housing Bank
IBA Working Group The terms of reference of the working group included to examine: Constitution of a SPV for setting up of CER The possibility of limiting entries into the Registry to only those related to mortgage of title deeds and subsequent expansion of its scope To frame rules/design forms/draft notification for giving effect to operationalisation of CER
IBA WG – Recommendations • The Working group submitted its report in June 2009. The recommendations by the WG included the following: • The CER may initially be set up for the purpose of registration of mortgages by deposit of title deeds in favour of banks and financial institutions. • The registration system can be extended to other categories of transactions in a phased manner after the set up of the registration system stabilizes • A new / existing company with a defined shareholding pattern can be appointed as the central registry to undertake the registry activities as contemplated under the SARFAESI Act.
IBA WG – Recommendations … • The Central Registrar appointed by the Central Government will serve as ex-officio Chairman of company. • The Memorandum and Articles of Association of the company to include clauses specified by the Central Government • All forms and fees for various functions by the registry be prescribed and processed in terms of rules framed under the SARFAESI Act • The WG suggested a revenue model and operations model for the Central Registry Company. It also provided estimates for IT costs.
Direct Access by User CER - Process Flow Website Payment Website Payment Offline Customer Access by User through Service Providers Central Server/Database User User Securitization or Reconstruction Company/Secured Creditor/Borrower Securitization or Reconstruction Company/Secured Creditor/Borrower Service Provider Service Provider Central Registry Company empanelled Service Providers-Banks, Depository Participants, Internet Kiosks etc. Central Registry Company empanelled Service Providers-Banks, Depository Participants, Internet Kiosks etc. Website Website of the Central Registry Company Payment Gateway Payments via internet transfer/RTGS/NEFT/ECS
Further Developments • Since the WG has submitted its recommendations they have been discussed with the RBI and others. As a result there has been a lot of change in the understanding of CER. • Central Government has made an allocation of Rs. 25 crores towards capital for setting up of Central Electronic Registry in its proposal for Budget 2009-10. [ Budget 2009 - 10 : Part V : Expenditure Budget Volume II : Demand No. 33 : A 26]
