Frauds in the area of Housing Finance - आरबीआई - Reserve Bank of India
Frauds in the area of Housing Finance
RBI No /2004-05 /151
UBD. No. BPD. 15 /12.05.01 /2004-05
September 1, 2004
The Chief Executive Officers of all primary (Urban) Co-operative Banks
Dear Sir,
Frauds in the area of Housing Finance
We advise that a Group headed by General Manager, Central Bank of India constituted by Reserve Bank of India examined the causes for growing incidence of frauds in Housing Finance and submitted its report indicating remedial measures. We forward herewith a copy of the report containing the remedial measures suggested by the Group for your information and necessary action.
Please acknowledge receipt to our Regional Office concerned.
Yours faithfully,
sd/
(N.S.Vishwanathan)
Chief General Manager
Encl: 5 sheets
ANNEXURE
REPORT OF THE COMMITTEE ON 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 factors / Suggestions for Preventive cures |
|
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/ third parties from the borrower's bank and deposited in fictitious account opened for this purpose and amounts are withdrawn from such bogus account.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 factors / Suggestions for preventive cures |
|
Point No. 3
Type of fraud |
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 factors / suggestions for preventive cures |
|
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 Factors / Suggestions for preventive cures |
|
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 banks / Housing Finance Agencies
|
Mitigating Factors / Suggestions for preventive cures |
|
Point No. 6
Type of Frauds |
|
Severity of fraud
|
MEDIUM |
Modus Operandi |
In this case after availing the initial loan amount, the booking is cancelled and the borrower directly take the refund from the builders.
|
Mitigating Factors / Suggestions for Preventive cures |
Registration receipt issued by Registrar of stamps office should bear hypothecation Clause as in case of certificate of Registration has in case of Auto Loan.
|
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 the legal title is with the bank / Housing Finance Agencies. |
Mitigating Factors / Suggestions for Preventive cures |
|
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 Factors / Suggestions for Preventive cures
|
In order to ensure end use of loan, bank should depute Officer for inspection / verification of property, whether it is Residential 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 banks / Housing Finance Companies. |
Severity of Fraud
|
MEDIUM |
Modus Operandi |
Builders / property developers after taking Construction loan from banks / Housing Finance Agencies are selling developed ready flats / Galas / developed plots, etc. without knowledge of their financiers & without repaying construction Funding loan to them. |
Mitigating Factors / Suggestions for Preventive cures
|
|