The Karnataka Bank Ltd has flagged the government’s ‘anywhere registration’ system for properties as ‘fraud prone,’ involving ‘credit risks’ while giving loans against immovable assets.
The Mangaluru-headquartered private lender has written two letters to the government through the State Level Bankers’ Committee (SLBC), underlining its concern that encumbrance certificates do not reflect the true status of properties that are registered in sub-registrar offices outside the jurisdiction where the assets are located. DH has copies of the two letters.
The ‘anywhere registration’ system is available only in Bengaluru since 2011.
Bengaluru has been divided into five registration districts - Basavanagudi, Gandhinagar, Jayanagar, Rajajinagar and Shivajinagar. Citizens can register properties in any sub-registrar office within the registration district.
“Obtaining legal scrutiny report with respect to clear and marketable title to the immovable property offered as security is an indispensable part of lending. The credit risk arises to the bankers when a property is registered in a sub-registar office other than the jurisdictional sub-registrar in the said region,” Karnataka Bank’s credit monitoring department said in its letter to the SLBC.
The bank narrated one case in which a mortgager had sold the property even before it was mortgaged to the bank. “This has happened since the property mortgaged was sold by registering the sale deed in a different sub-registrar office and not in the jurisdictional sub-registrar office and encumbrance certificate obtained from the jurisdictional sub-registrar office appeared as NIL as the data of the sub-registrar offices were not interlinked,” it explained.
The bank said it held a meeting with experienced advocates to discuss the matter.
It was found that under Section 64 of the Registration Act, sub-registrars have to let their counterparts know if a property has been registered outside the jurisdiction where it is situated. This may not be followed and ‘banks are exposed to risk’.
“The issue is affecting all banks,” the letter stated. The matter came up for discussion at the SLBC meeting held recently.
According to sources, chief secretary Vandita Sharma sought a clarification from inspector-general of registration Mamatha B R.
Apparently, Mamatha explained to Sharma that the Karnataka Bank’s concerns were wrong.
“There is integration among sub-registrar offices. Wherever you register a property within Bengaluru, encumbrance certificates are integrated,” Mamatha is said to have told the chief secretary.