RBI To Standardise Property Title Searches Before Loan Sanctions

New Delhi, Jul 8 (KNN) The Reserve Bank of India (RBI) is expected to issue guidelines to standardise property title searches before banks sanction loans, with the aim of strengthening due diligence and reducing fraud involving mortgaged properties.

RBI Plans Uniform Property Title Verification Norms

The central bank has sought feedback from banks on the proposed framework. The guidelines are expected to prescribe a minimum period for title searches, key documents and land records to be verified, and precautions to be followed while preparing legal title verification reports.

Supreme Court Pushes for Standardised Due Diligence

The move follows a Supreme Court directive issued last year asking the RBI, banks and financial institutions to develop a standardised mechanism for conducting property title searches before extending loans.

The apex court also recommended fixing accountability, including possible criminal action, against officials approving loans without proper verification, reported Economic Times.

In its judgment, the court emphasised the need for banks to exercise greater caution while relying on title clearance reports, stating that inadequate verification poses risks to public funds and the broader financial system.

Framework Aims to Reduce Mortgage Fraud

At present, property title verification practices vary across lenders, with some banks examining ownership records for 10 years while others verify records spanning 30 years or more.

The proposed RBI framework seeks to introduce uniform standards for property title verification, ensuring that all banks undertake a minimum level of legal due diligence before accepting immovable property as collateral for loans.

The initiative is expected to improve lending practices, enhance legal certainty and reduce the risk of disputes and fraudulent mortgage transactions.

(KNN Bureau)