The Hindu Business Line : Cops on home loan trail!

There is some unpleasant news for bank managers who have had the misfortune of lending money to borrowers who defrauded them. The police plan to take stern action against them, especially those who have not followed the prescribed procedures to the T.

A spate of home loan frauds has come to light recently — of cases where borrowers have used fake documents and title deeds, and different banks financing the same property (one case reportedly involves 22 banks financing one property), of banks giving loans based on fake salary certificates and developers selling the same property to three or four buyers!

According to police sources in Chennai, they are looking into nearly 90 cases of housing loan frauds involving nearly Rs 100 crore. Police officials say, "We are examining these fraud cases to see if there are procedural lapses. If that is the case, we are examining the branch manager concerned closely and proceeding on the assumption that there has been a collusion."

And added something else that may send a shiver down the spine of many a bank officer, "It is always the bank which loses the money and suffers a loss. Nothing happens to the ones who gave the loan. We are waiting for a water-tight case to prosecute those who are guilty and set an example."

Police sources say that they have come across a number of cases where the due diligence has not been done. "In quite a few cases, bankers have failed to register the mortgage with the sub-registrar's office. This simple precaution could have saved a couple of banks," according to police officers.

That's a point made some years ago, by Mr B.D. Narang, former Chairman and Managing Director, Oriental Bank of Commerce. While speaking about the housing loan boom at the Bank Economists Conference in 2003, he had said, "What the banks keep are the sale deeds, and the properties are not mortgaged to them. Sale deeds cannot be treated as conveyance deeds." He said home loans were unsecured loans.

Some bankers say that in the race to grab business, there was little adherence to "know your customer" norms and non-observance of elementary checks such as field visits to the place of residence and offices of borrowers and guarantors and verifying other details given in the loan application. They say they have since streamlined procedures and that these slippages would not happen now.

Tell that to the police officials and they give you a pitying look. One feels the weight of experience as one of them says, with just a touch of scorn, "These are what has come out so far. And these cases pertain to the years between 2001 and 04. What is happening now will come out a little later!"

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