PUNJAB & SIND BANK

H.O.LAW & RECOVERY DEPARTMENT

4TH FLOOR, BANK HOUSE, 21 – RAJENDRA PLACE, NEW DELHI - 110125
TEL NO: 011-25786502 ; FAX NO: 011 – 25722349 ;E-mail: holr@psb.org.in
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MASTER CIRCULAR NO. :8 DATED: 26.08.2013
CODE No. of the Department : H-9010
Number of pages of Circular : 15
Running Circular No. of the Bank :
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ALL BRANCHES/CONTROLLING OFFICES

CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES AND INFLATED
VALUATION OF SECURITIES.

INTRODUCTION:

In the recent past, there has been a spurt in fraud cases perpetrated by unscrupulous borrowers by either
offering fake/ forged title deeds as security or by creating multiple mortgages on the same property. They
are also instrumental in getting higher valuations for properties offered as security, with a view to avail
higher amount of credit facilities from Banks. In fact, no organization can be completely immune to such
fraudulent activities. But steps can be taken to prevent and reduce the magnitude of the fraud.

The identified vulnerable areas are:

• Genuineness of title deeds

• Multiple mortgages
• Valuation of properties

Over a period of time several directions have been issued to tackle this menace of frauds. The
prominent directions are contained in Law Circular No. 183 dated 12.05.2006 and 196 dated
13.102009, Head Office Inspection Circulars No. 234 dated 21.04.2008 and Circular No. 246 dated
26.07.2008, Head Office Credit monitoring Circulatory Letter No. 33/09-10 dated 11.12.2010. The
directions contained in these circulars are comprehensive. In the present guidelines, these directions
are being put in place in a compact form to facilitate easy compliance. The extant circulars are
being superseded to the extent it has been covered in the present guidelines to prevent incidences of
fraud.

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

Before suggesting any course of action for prevention of frauds, it would be worthwhile to analyze the
problem areas which propel incidents of fraud.

MODUS OPERANDI:
----------------------------

From past experiences, it is revealed that frauds have happened on account of the under mentioned reasons:

i) Creation of more than one title deeds which are apparently similar.
 (2)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
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ii) Equitable mortgage on the basis of Coloured Xerox copy of the title deeds.

iii) Not providing the entire chain of title deeds and missing chains are utilized for creating another set
of forged documents.

iv) Mortgage on the basis of allotment letters and later on original title deeds are deposited with another
Bank/ Institution.

v) Title deeds are taken back from the Bank on some pretext and the property is sold/ mortgaged with
others, without the consent of the Bank.

vi) A long gap between sanctioning of the loan and disbursement of the same provides an opportunity
to the borrower to mortgage it with some other institution in the intervening period.

vii) A part of the property mentioned in the title deed is already sold while title deed for whole property
is retained which later on is deposited with the Bank purporting to be the title of whole property.

viii) Mutation in Bank’s favour is not entered in the Revenue Records and the property is subsequently
sold by the borrowers.

ix) Index Inspection, Non encumbrance certificate and legal opinion are given by the advocate in a very
casual manner on the basis of declaration by the borrower without physically verifying the records.
Even the office of Registrar is not visited and record is not seen which results in sanction of loans to
fraudulent borrowers. At times, the advocates do not give a clear opinion but use the words ‘based
on whatever record is available in Sub Registrar’s or ‘Bank may do further due diligence at their
level’.

x) It is the borrower who interacts with the advocate and the valuer for obtaining non encumbrance
certificate by direct interaction and the borrower is in a position to influence the advocate and the
valuer.

xi) Property intended to be mortgaged is not physically verified to ascertain as to who is in occupation
of the property.

xii) Property proposed to be mortgaged is undivided or un-demarcated.

xiii) Coloured photocopy of the title deed is got laminated to make it difficult for the Bank to ascertain
originality of the document.

xiv) KYC norms are not complied with for the identification of mortgager.

xv) Fake old stamps are used to type the two sets of Registry.
 (3)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
------------------------------------------------------------------------------------------------------------

II. PREVENTIVE STEPS TO CONTROL THE SITUATION:

---------------------------------------------------------------------------

As stated above, frauds cannot be eliminated but efforts can be made to prevent and control them.
As we all know, fraud is a sensitive issue as it results in reputational loss besides affecting
profitability of the bank. In this attempt, following strategy requires holistic follow up and
compliance:

i) KNOW YOUR CUSTOMER (KYC) NORMS:

KYC is due diligence exercise to ensure that financial transactions are not used for money laundering or
fraudulent purposes. It has to be rigorous without being cumbersome. A proper compliance of KYC norms
eliminates chances of frauds to a large extent.

If the Bank is sure about the identity of a person and his location, chances of defrauding the Bank become
minimal. Identity of the mortgager should be thoroughly examined. Efforts should be made to procure Bank
account details of the mortgager to satisfy that the property was bonafidely purchased by him/her and he/she
is the rightful owner of the property mortgaged. Identification of the mortgager and compliance of KYC
norms is the personal responsibility of the Branch Manager.

ii) MARKET INTELLIGENCE:

Market Intelligence envisages that the Field Functionaries should keep abreast of the developments of the
area. It is seen that fraudulent tendencies are part of the discussion in the society and one cannot fool all the
persons all the time. If the Field Functionaries remain in touch with the social happenings in the area and
operate through a mechanism of intelligence, it is expected that fraudulent activities are noticed well in
advance before the bank falls prey to it.

iii) INDEX INSPECTION:

Preferably, Index inspection, non-encumbrance certificate and legal opinion on title to properties offered
as security should be first obtained at the time loan proposal is received and secondly just before
disbursement of loan if there is sufficient gap between Index Inspection and disbursement. This is to avoid
any possible charge on property that may be created in the intervening period. In case amount of credit
facility exceeds Rs.50 crores, Index Inspection, non-encumbrance certificate and legal opinion may be
obtained from two independent counsels.

In several cases, it is seen that the Index Inspection Report does not cover the entire period from the date of
last transfer but covers only a fixed period of 13 years. In all matters, besides the normal Index Inspection
Report and Legal Opinion, a Report on Title (as per format given in Annexure-I) shall be obtained.
 (4)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
------------------------------------------------------------------------------------------------------------

iv) CERTIFICATE BY BRANCH MANAGER AND ACCOUNTANT ON PHYSICAL

VERIFICATION OF PROPERTIES AND ITS VALUATION AND ATTACHMENT OF SECURITY
SHEET CUM CERTIFICATE BY BM:

Before disbursement of loan, the Branch In charge and the second man shall submit a certificate as per
draft enclosed of Annexure-II, to the effect that they have physically verified the properties mortgaged and
their valuations.

This certificate is part of indispensable requirements for sanction of loan and should be invariably attached
with loan documents.

v) CHAIN OF TITLE - CERTIFICATE BY THE ADVOCATE:

Examination of chain of title is one of the most crucial aspects in title investigation. It has to be ensured
that entire chain of title deeds is obtained from the borrower and the advocate should invariably state that
he has inspected all relevant records and documents concerning the property. The advocate in his opinion
must state specifically which documents of the chain are to be obtained in original.

The Advocate should also attach a declaration as per Annexure-IV, which is a mandatory requirement.

vi) CERTIFIED COPY OF TITLE DEED FROM SUB-REGISTRAR:

Whenever title deeds are offered as security for availing loan facility and for creating Equitable Mortgage,
the Bank should immediately apply to the concerned sub-registrar for a certified copy of the title deed.
Receipt of such a certified copy from the Registrar's office and its cross tallying with the original title
deeds in Bank's hand, is a proof to genuineness of the documents of title.

vii) REGISTRATION OF EQUITABLE MORTGAGE WHERE EVER POSSIBLE:

Creation of Equitable Mortgage does not require registration, is the general law, but there are few states
like Tamil Nadu, Madhya Pradesh and Union Territory of Chandigarh, Maharashtra etc., where
amendments have been made in the law and transactions of Equitable Mortgage are registered on
payment of nominal fees (appx.Rs.1000/-). Registration of Bank's charge, by way of Equitable
Mortgage, in such states should be insisted upon by the Bank.

In States where Registration of equitable mortgage is not compulsory and equitable mortgage is created
by Bank, the concerned Sub-Registrar be informed of the fact by way of a letter under registered cover,
with a request that this letter be kept in the relevant file alongwith records of the property mortgaged.
This will help in prevention of any subsequent mortgage.

viii) REGISTRATION OF BANK'S CHARGE ON COMPANY'S ASSETS:

In cases where property mortgaged is in the name of Company, Bank’s charge should be got registered
with ROC, in terms of provisions of Companies Act, within the stipulated period.
 (5)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.

ix) SAFE CUSTODY OF TITLE DEEDS:

Bank should not part with any of the original documents of title during the currency of the credit
facility, as unscrupulous borrowers obtain title deeds on some frivolous excuse and then may create
encumbrance on the property without Bank's knowledge.

x) LEASE HOLD PROPERTIES:

In case of Lease Hold Properties, the following precautions need to be taken:

a. Permission should be obtained from Lessor for mortgage of property.

b. Total Lease period and unexpired lease period must be taken note of to ensure that period of
mortgage does not exceed the residual period of lease agreement.
c. There must not be any onerous clause in the lease deed which may prejudice the interest/cause of the
Bank.

xi) PREVENTION OF IMPERSONATION BY MORTGAGOR:

Branch (es) should exercise utmost caution while accepting sale deeds/title deeds and other documents of
properties as collateral securities. Following measures are suggested to safeguard Bank’s interest:

Branch may insist on opening of Bank accounts (with photograph, introduction, etc.) by owners of
property who offer the same as collateral security against loans given to the third parties.
Alternatively, proof of details of their Bank accounts with other Banks/ Branch (es) of our Bank, be
kept on record.

Branch should send a letter through registered post to the owners of the property to confirm their
residential address and their willingness to offer the security as collateral. Wherever possible,
Branch Incharge or any other staff incumbent should visit the residence of the proposed mortgagor
to confirm these facts.

However, in exceptional cases, if the person offering the mortgage is not an account holder of the
Bank and is not willing to open the account with us, the Branch may not insist upon opening of
account but shall obtain documents of his identity proof, residential proof etc. along with letter of
request showing the intention to create mortgage by deposit of title deeds. Confirmation of address
through Registered Letter as advised hereinabove be done invariably, and additionally physical
verification be also done by the Branch Manager/ Loan Officer.
 (6)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
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xii) ACTION AGAINST ADVOCATES:

In all cases where Bank's advocate misrepresented facts and gave false opinion or has connived with
the Borrower/ Guarantor to commit a fraud, should not be allowed easy exit route. Strict action should
be taken against such erring advocates, by the Competent Authority. In terms of Law Circular No. 164
dated 13.04.2005, Zonal Managers have been empowered to de-panel bank’s advocates. Law Department
vide its letter dated 19.03.2010 has given instructions with regard to lodging of complaints with State Bar
Councils on malpractices/professional misconduct by advocates. These instructions were further
reinforced on 17.09.2012. It was stipulated that a clause be inserted in the application which is submitted
by the advocate for requesting for an empanelment. In terms of this clause, a liberty is bestowed on the
bank for taking legal action including lodging complaint to the professional body for any misconduct
including submission of false distorted/incorrect reports. In the light of this clause, the erring advocates
should not only be depanelled, but steps should be taken for cancellation of their membership of Bar
Council. Likewise, criminal case should also be registered against such Advocate, in case his connivance/
conspiracy lead to fraud.

xiii) ACTION AGAINST VALUERS:

In all cases where Valuer on Bank’s panel has inflated the value of securities at the time of lending much
above the Market Value at that time, should not be spared and must be taken to task. He should not only be
immediately depanelled, steps should also be taken for suitable action. In terms of HO Credit Monitoring
Policy Department’s circulatory letter No. 27 dated 24.09.2012, a liberty has been given to the Bank to take
appropriate action as discussed above in cases of professional misconduct by advocates. In the light of this
liberty, appropriate legal action must be initiated against the valuer.

xiv) PRE SANCTION AND POST SANCTION INSPECTION:

The concerned Branch Manager should carry out proper pre sanction inspection to identify the property
mortgaged and also conduct post disbursement inspections of properties at periodical intervals as per
extant guidelines which are contained in ID circular No. 1563 dated 25.03.2004 and updated in the Loan
Policy from time to time.

xv) CASES WHERE THE PROPERTY IS SOLD FLOOR-WISE:

While accepting the chain of documents of property sold floor wise, the original documents to the land
is normally retained by the owner or any one of the occupants. In this situation, such original
documents should be seen and appropriate remarks about ownership of purchaser of property floor wise
be made, so that the public at large is put to notice that ownership of so and so floor constructed on the
said land lies with _____________(Name of the owner) and returned after attestation, to rule out any
subsequent encumbrance.

Secondly, the factum of holding of documents of title to property lying with the owner or any other
occupant should be recorded in the Registered Sale Deed of the property going to be mortgaged with
the Bank.
 (7)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
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xvi) TAKE OVER OF THE CHARGE BY THE NEW INCUMBENT INCHARGE

At the time of takeover of the Charge of the Branch by the new incumbent Incharge, it should be
ensured that all the properties mortgaged to the Bank in Loan Accounts exceeding Rs.50 crores, are
visited by the Branch Incharge/ Loan Officer/ Loan Manager to ensure that security cover is intact.

xvii) PROCUREMENT OF STAMP PAPERS

Stamp Paper to be procured On-line or the name of the vendor and its Registration Number must be
mentioned on the back side of the stamp paper.

xviii) REGISTRATION WITH CERSAI

Under the provisions of Section 23 of the SARFAESI Act, particulars of any charge creating
security interest over property is required to be filed with the Registry within 30 days from the
date of creation. It is reiterated that all the charges over the property are mandatorily registered
with CERSAI and reference of the same must be made while considering any loan proposal.

It may be noted that the time given for registration of such mortgages would be 30 days from
the date of creation of the mortgage.

A comprehensive checklist is enclosed as per Annexure-III, a copy of the same duly signed by
the Branch officials to be kept on record for each case.

The remedial steps as suggested above are illustrative and not exhaustive. The perpetrator of
frauds keeps on changing their modus operandi from time to time.

B. VALUATION OF SECURITIES
-------------------------------------------

The guidelines on the valuation of properties are contained in Head Office Advances Department Circular
No. 1/2008 dated 11.01.2008, Head Office Advances Circulatory No. 42/2011 dated 26.02.2011, Circulatory
Letter No. 28/2011 dated 27.09.2011, Circulatory letter No. 39/2011 dated 01.12.2011 and Head Office
Credit Monitoring Circulatory letter No. 1/2013-14 dated 03.04.2013, Head Office Vigilance Department
Circular No. 184/2004 dated 18.112004 and Head Office Vigilance Department Circular No. 468/2011 dated
26.04.2011. These guidelines are not being reproduced. However, for prevention of frauds, some specific
issues have been emphasized, which will supersede extant guidelines to the extent covered here under:

It has been noticed that inflated valuation of immovable properties at the time of sanction of credit facilities
is responsible for the spurt in incidences of fraud. As we all know, with the passage of time value of
property increases instead of declining. It is inexplicable that when such properties are valued at subsequent
stage, the value actually declines and that too drastically.
 (8)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
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For example, in compromise settlement cases, the valuation of properties at the time of submitting
settlement proposal are far less than the valuation taken on record at the time of sanction of said
loan proposal. Likewise, while fixing Minimum Reserve Price (MRP) at the time of DRT sale or
sale under SARFAESI Act, 2002, the latest valuations are much lower than the values at the time of
sanction of loan. Similarly, at the time of sale of the property under SARFAESI, the value of
property is lower. It is contrary to the usual phenomenon that with the passage of time, the
immovable property gains in value. It is perceived that unless there is some connivance or malafide
intention, the value at subsequent stage has to be higher than the earlier valuation.

With a view to check incidence of divergence in the valuation of the immovable properties at the
time of sanction and subsequent valuation at the time of considering the proposal for compromise/
negotiated settlement/ sale of property at DRT/sale of property under SARFAESI the following
points should be kept in mind: -

a. Appreciation vis-à-vis depreciation in the valuation of property from original value of the
property must be analyzed thoroughly with reasons.

b. Valuer while giving valuation report on the Bank’s prescribed format has to ensure
completion of due diligence and shall, inter-alia, keep the following points in view: -

That he himself visited the site and made necessary enquiries from some local property
dealers of the concerned locality to confirm that the property in question belongs to the
person who is offering the property to the Bank for accepting as security as on date of
valuation.

That the immovable property in question bears the same description/ details as mentioned in
the documents/ title deeds.

That the value of property shown in Personal/ Firm/ Company’s Balance Sheet or rates
considered for property tax return must be compared/ referred for cross checking of the
valuation report.

That the Completion Certificate is obtained and put on record to ensure construction as per
approved plan.

That the property in question is not marked for acquisition under existing/ future
development plan of the State/ Central Government body.

That the Valuer shall indicate how the value has been arrived at duly supported by
necessary calculations and furnish market value as well as realizable value.
 (9)

A. CURBING FRAUDS DUE TO FAKE TITLE DEEDS/ MULTIPLE MORTGAGES

B. CHECKING INFLATED VALUATION OF SECURITIES.
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In case of difference in the market value and circle rate as applicable in that area, the same
should be supported by cogent reasons.

Attach plans and elevations of all structures standing on the land and a layout plan
alongwith a photograph of the built up property.

Valuer must give the impact on value of property in case of change in its usage in future.

In case, it emerges that the value of the property was inflated at the time of sanction of credit
facility, action must be initiated as laid out in previous paragraphs.

Further, in all cases mentioned above, valuation of property shall also be done by the incumbents by
adopting one or more of the following methods: -

Taking architect’s or Valuer’s/ engineer’s certificate if the property consists of a building.

Personally inspecting the property

Scrutinizing the valuation certificate issued by local authority for taxation purposes.

Making enquiries through brokers/ neighbours etc.

Net yield method (by way of rent).

Based on this analysis, fair market value has to be ascertained and it should be utilized for cross checking
the valuation submitted by the valuer. This cross checking will prevent inflated valuation of the properties.

(H.S.GUJRAL)
ASSTT.GENERAL MANAGER (L&R)
 ANNEXURE-I

REPORT ON TITLE

REG: Property situate at _____________

Belonging to _________________

S.NO. ASPECTS TO BE CONSIDERED COUNSEL’S STATEMENT

A. PARTICULARS

1. Name of the Borrower with address:

2. Name of the person offering Mortgage with

parentage/constitution and address:

3. Name of the person(s) who shall sign the Mortgage

Deeds/documents to create valid equitable
mortgage.

4. Details of the property to be mortgaged:

As per title deed -------

As per present position --------

B. INVESTIGATIONS

1. Details of the title deeds/documents (including

Link Deeds/Parent deeds), House Tax Receipts,
affidavits to be deposited for creation of the
mortgage (with full particulars regarding nature of
document, date of execution and details of
registration)

2. Whether Counsel has physically checked the

original documents of the title deeds as well as the
chain of title of property?

3. Whether documents given as original title deeds

raise any doubt or suspicion?
S.NO. ASPECTS TO BE CONSIDERED COUNSEL’S STATEMENT

4. Whether the particulars of registration as given in

the title deed shown to the counsel tally with the
particulars as stated in the records of the
Registrar’s Office?

5. Whether the property has been mutated in the name

of the person offering the mortgage?

6. Whether equitable mortgage can be created at the

place where the Branch disbursing the loan is
situate?

7. Whether there are any restrictions regarding sale of

the property to be mortgaged? (In some States,
there are restrictions for sale of property to
residents outside the State).

8. Whether SARFAESI Act can be enforced on the

property (ies) in question?

NOTE: The above declarations are in addition to the legal opinion on ownership and non encumbrance of
the property.

---------------------------------------------------
(NAME OF THE ADVOCATE/COUNSEL)

DATE: _____________

PLACE: ____________
 Annexure-II

VISIT CUM VALUATION REPORT

(To be given by Officer and Branch In charge)

Name of the account ________________________________________

1. Name & address of landlord/landlady:

2. Whether Self-Occupied OR in possession of tenants:

3. Whether Agricultural/Residential/Industrial/Commercial:

4. Date of purchase of property and consideration paid:

5. Particulars of property:

a. LAND

i. Area in square meters:

ii. Rate per sq.meter in that Area:
iii. Rate per sq.meter (floor rates)
iv. Total value of land:

b. BUILDING

Value of building keeping in view

the built up area, no. of stories &
type of superstructure etc.

6. Total value of land & building (a+b):

7. Municipal/Revenue No.:

8. Date up to which taxes paid :

Certified that I/we have personally visited on _______ the

site of the property (ies) and have discreetly and with due
diligence verified the market value of the said property (ies)
after taking into account the factors such as depreciation
distress sale, unauthorized construction lack of legal mortgage
third party claims etc. is not less than Rs._________lacs
(Rupee…………..)

Accountant/Manager Branch In charge

Name: Name:
Date: Date:
 Annexure-III

Branch Office_________________
Title of Borrowal A/c___________________
Description of Immovable Property__________________________________

Observations Y/N DATE

1. Observance of KYC Guidelines in respect of the
Borrower(s)
Guarantor(s)
Mortgagor(s)
2. Opening of account by owner of immovable property who has offered the
immovable property as collateral security against loans to third party or

Proof of details of the Bank account with other Banks/ Branches of our
Bank of the mortgagor on record or

In cases where the mortgagor is not our account holder and unwilling to
open an account with us, whether:

Documents of his identity proof, residential proof etc. taken

A letter of request showing intention to create mortgage by
deposit of title deed obtained.

Physical verification done by BM/ Loan Officer
3. Whether letter through registered post sent to owners of immovable
property to confirm residential address and their willingness to offer
security as collateral or
BM or any staff incumbent visited the residence of proposed mortgagor to
confirm above.
4. Report on pre-sanction survey
5. a. Whether originals of complete chain of title deeds provided to
Advocate before Inspection of Index/ Revenue Record.
b. Whether original title deed and its chain of documents match with the
legal opinion.
6. i) Legal Opinion/ Index Opinion/ Non Encumbrance Report taken at the
time of receipt of loan proposal (1st Index Inspection).
ii) Whether Legal Opinion/ Index Opinion/ Non Encumbrance report
taken after disbursement of loan (2nd Index Inspection)
iii) A ‘Report on Title’ taken as per format I
iv) Whether immovable property is properly demarcated.
v) Copy of sanctioned plan obtained
vi) Whether all statutory dues have been paid up-to-date and proof of the
same put on record of the Bank.

Contd…..2
Branch Office_________________
Title of Borrowal A/c___________________
Description of Immovable Property__________________________________

Observations Y/N DATE

7. i) Certified copy of the Title Deeds obtained directly from Sub-
Registrar before disbursement of loan.
ii) A certificate from Advocate that the certified copy tallies with the
original kept on record on re-checking and that the mortgage is
proper.

8. a. Valuation of the immovable property obtained from approved valuer as

per ID Circular No. 1/2008 dated 11.01.2008 and HO Advances
Circulatory Letter No. 42/2010 dated 26.02.2011.
b. Verification of immovable property by BM/Accountant of the Branch
independently before disbursement (Annexure-II)
c. The valuation of immovable property, during the 1st year of the
registration deed, taken as per the prevalent collector rate/ circle rate or
realizable value of immovable property whichever is lower for exposure
upto Rs.50 crores only. Or
The valuation of immovable property, during the 1st year of the
registration deed taken equivalent to the consideration mentioned in the
said deed in cases where exposure of the Bank is more than Rs.50 crores.
9. a. Whether NOC/ Permission from Society/ Concerned Authority
obtained before creation of mortgage.
b. Lien marked after creation of mortgage/ mutation got done in Bank’s
favour in Revenue Record/ Intkal approved by the Competent Authority.
c. Equitable mortgage got registered/ noted (in respect of States which
have such provision) before allowing disbursement.
10. a. If immovable property is in the name of Company, Bank’s Charge got
registered with ROC.
b. In Consortium Advances, the value assessed by the approved valuer(s)
engaged by Lead Bank, taken as valuation.
c. In multiple Banking cases, value assessed by the approved valuer of our
Bank or valuation of other Banks, whichever is less, taken into
consideration.
11. Vetting of documents: 1st stage 2nd stage (if
applicable)
12. Insurance of Superstructure got done.
13. Post-Disbursement visit to ensure end use of funds
14. In cases, where negative lien is created, whether Deed of Negative lien
duly approved by Bank’s counsel is obtained on Non-Judicial Stamp
Paper of appropriate value besides chain of title deeds.

Officer (Loan) Manager Branch Incharge

 Annexure-IV

A draft legal opinion containing following declarations by the advocates be put in use for all branches:

a. That I have physically checked the original documents of the title deeds as well as the chain of title
of property.

b. That following documents are required to be deposited with the title in the Bank. (Detail of title
deeds, House Tax Receipts, affidavits etc.)

c. That mortgage deeds/ documents should be signed by the following person(s) to create valid equitable
mortgage.

d. That the SARFAESI Act can be enforced on the property in question.

The above declarations are in addition to the legal opinion on ownership & non encumbrance of the
property.

Signatures of Advocate
Name of Advocate
 Annexure-VI

Causes and Remedial Actions on Incidence of

Frauds in Housing Finance

Point No. 1

Type of Frauds Fabrication of Income Documents like Income-tax return, salary

slip/balance sheet etc.

Severity of fraud LOW

Modus Operandi Committed generally by borrowers in connivance with Direct

Selling Agent/Estate Agent/Builders.

Mitigating • Verification of salary slips with employer.

factors/Suggestions for • Income Tax Department should upload on their website
Preventive Cures the list of Income Tax payers and defaulters.
• Salary amount should be compared with Bank Statement.
• Cross verification of balance sheet.
• Personal interview of the borrower plays very important
role.

Point No. 2

Type of Frauds Loan amount disbursed by way of cheque/Demand drafts are

encashed by third party/agents etc.

Severity of fraud MEDIUM

Modus Operandi Disbursed amount cheques are collected by the Agents/third

parties from the borrower's bank and deposited in fictitious
account opened for this purpose and amounts are withdrawn
from such bogus account.

Mitigating • Cheques should be issued in the name of bankers to the

factors/Suggestions for Builders with the bank account number on it.
Preventive Cures • Cheque should not be handed over to the
borrower/agent/seller. Bank's Officials can be sent for
delivery of cheque to the builders/sellers of property at
 the registered address mentioned in the title deeds.

Point No. 3

Type of Frauds Title documents being forged – Stamped documents forged by

borrower customer/builder

Severity of fraud HIGH

Modus Operandi Coloured Xerox copy of various documents are produced

including encumbrance certificate, fake stamp papers etc. which
are difficult to identify/distinguish from the original one.

Mitigating • Tracking and sharing of all information among the Banks

factors/Suggestions for about names of blacklisted builders & developers.
Preventive Cures • In case of large value loans, Banks can approach the Sub-
Registrar's Office to verify the genuineness of stamp
paper/documents/registration receipts etc.

Point No. 4

Type of Frauds Over valuation of the property

Severity of fraud MEDIUM

Modus Operandi These frauds are committed to draw higher loan amount by the
borrower in connivance with the builders/valuers. The value of
the property are inflated by including various expenditure and
additional amenities, fixtures, legal charges, society advance,
maintenance charges etc. which are non-existing.

Mitigating • For valuation over Rs. _____ lacs, valuation should be

factors/Suggestions for done by two independent valuers.
Preventive Cures • Bank should develop in house expertise for valuation of
properties.
Point No. 5

Type of Frauds Multiple financing

Severity of fraud HIGH

Modus Operandi These frauds are extension of the fake documents that are
produced to different bank.

Mitigating • Tracking & sharing of information among the bank about

factors/Suggestions for names of black listed builders & developers selling same
Preventive Cures properties to more than one buyer.
• Bank should insist on the original title deeds of the
landed property on which structure is built.

Point No. 6

Type of Frauds Cancellation of booking of flats/property i.e. collusion between

customer and builder

Severity of fraud MEDIUM

Modus Operandi In this case after availing the initial loan amount, the booking is
cancelled and the borrower directly takes the refund from the
builders.

Mitigating Registration receipt issued by Registrar of stamp office should

factors/Suggestions for bear hypothecation clause as in case of certificate of registration
Preventive Cures in case of auto loans.

Point No. 7

Type of Frauds Sale of property by loanee without clearing existing loan.

Severity of fraud MEDIUM

Modus Operandi Property is sold through duplicate/fake title deeds even though
legal title is with the Bank.

Mitigating • Equitable mortgage should be created at Registrar's

factors/Suggestions for office by deposit of title deeds.
Preventive Cures • Internal due diligence plays important role to prevent this
type of frauds.

Point No. 8

Type of Frauds Mis-representation of end use of loan

Severity of fraud LOW

Modus Operandi Loan taken for residential housing property. However,

commercial property is purchased by availing such loan.

Mitigating In order to ensure end use of loan, Bank should depute officers
factors/Suggestions for for inspection/verification of property, whether it is residential
Preventive Cures housing property or commercial property.

Point No.9

Type of Frauds Sale of property by builder without clearing/repaying

Construction Funding Loan availed by them from bank

Severity of fraud MEDIUM

Modus Operandi Builders/property developers after taking Construction loan from

bank are selling developed ready flats/Galas/developed plots etc.
without knowledge of their financiers & without repaying
construction funding loan to them.

Mitigating • This aspect of construction funding loan whether availed

factors/Suggestions for by the developer/builder or not, should be verified at
Preventive Cures project clearance level by bank.
• Original document should be called for verifications at
the time of appraisals of any housing loans.
SECURITY SHEET CUM CERTIFICATE BY BRANCH MANAGER

1. Whether Index Inspection Report, Non-Encumbrance YES/NO

Certificate and legal opinion is available and
match with the details of original title deeds.

2. Whether original title deed and its chain of YES/NO

Documents are there and match with the legal
Opinion.

3. Whether physical verification of the property YES/NO

carried out and its valuation certificate
given by the BM and Accountant.

4. In case the property is mortgaged in the name of YES/NO

the company, whether Bank's charge got registered
at ROC office or not.

5. Whether the BM/ Accountant/ Loan Officer visited YES/NO

concerned Sub-Registrar office and verified the
title deeds from the record of concerned Registrar
office.

Branch Manager