RBI has issued directions to banks to include the disclosure clause in their loan agreement with the builders, pursuant to a recent Bombay High Court order.
“While granting finance to specific housing/development projects, banks are advised to stipulate that the builder/developer/company would disclose in the pamphlets/ brochures, the names of the banks to which the property is mortgaged,” RBI said in a notification. A builder would have to publish loan details in advertisements given in newspapers or magazines, and also mention that it has a no-objection certificate from mortgagee banks for sale of the property, it said.
“Banks are advised to ensure compliance of the above terms and conditions and funds should not be released unless the builder/developer/company fulfills the above requirements,” the notification added.
Working Group’s tenure
RBI on Friday also extended the tenure of Working Group to review the Benchmark Prime Lending Rate (BPLR) by one month to end- September 2009. “The Reserve Bank of India has on Friday extended the tenure of the Working Group on Benchmark Prime Lending Rate (BPLR) by one more month, from end-August 2009 to end-September 2009,” RBI said in a release.
The RBI had constituted a six-member working group in June to review the benchmark prime lending rate (BPLR) system and suggest a mechanism for pricing floating rate loans, a move that will improve transparency in the way banks set interest rates on housing loans.
The working group, chaired by RBI Executive Director Deepak Mohanty, comprises J P Morgan India Chief Economist Jahangir Aziz and Indian Institute of Management Ahmedabad Professor T T Rammohan as members.
