Why put the onus on banks?
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The RBI has issued fresh directives to cooperative banks on housing loans.
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The Reserve bank of India (RBI) has been forced to tighten the rules to be followed by lending institutions, especially cooperative banks and financial institutions operating in the rural backdrop, in the wake of a recent Delhi High Court judgment.
Let us look into the repercussions of this move in the aftermath of other serious threats.
Banks have their own rules and guidelines for sanction of loans. Cooperative banks too have adopted general guidelines for lending. They are, sometimes, more liberal than those of the commercial banks.
There are a good number of institutions in the cooperative sector whose approach to business development and customer service is excellent. Many cooperative banks are fully computerised and they match other banks in expeditious disposal of customer requests, including consideration of home loans, though in quite a large number of cases, they go by the standing and reputation of the customer.
RBI’s directive
The RBI has issued fresh directives to district, state and central cooperative banks in respect of granting housing loans, the salient features of which are:
•To check whether the housing loans they have sanctioned or will be sanctioning are for an authorised or unauthorised structure.
•Sanctioned plan by the competent authority be obtained in the name of the applicant who approaches the bank for loan and who owns a plot/site or land.
•An affidavit-cum-undertaking be obtained from the person who is seeking the loan to the effect that he or she shall not violate the sanctioned plan and the construction shall be strictly as per the plan.
•It shall be the sole responsibility of the executant of the affidavit to obtain completion certificate within three months from the completion of the construction, failing which the bank shall have the power and authority to recall the entire loan with interest, costs and other charges.
•An architect appointed by the bank must certify at various stages of construction that the construction is according to the sanctioned plan and a final certificate be obtained to the effect that completion certificate has been obtained and kept on record.
Other conditions
In the case of a loan for purchase of a built house or apartment, the applicant has to declare in the affidavit-cum-undertaking that the property is strictly according to the sanctioned plan and a completion certificate has been obtained.
Rules
In addition, the certificate from the architect should also contain affirmation to the effect that the building bylaws applicable to the property have been strictly followed.
No loan should be considered for unauthorised property or construction until it has been regularised by the appropriate authority after payment of charges/ levies. The most crucial directive is that in case a residential property is developed for commercial or semi-commercial purposes, no loan be considered even if the applicant has approached the authorities for permission.
Background
While the RBI guidelines for home loans are already in existence and all banks and financial institutions are bound to follow them, the present directive appears to have come in the aftermath of the Delhi High Court judgment on a writ petition in the Kalyan Sansthe Welfare Organisation vs. Union of India case.
In this case, the court came down heavily in respect of the unauthorised construction on government land and against the building bylaws in force.
The court order also directed that the RBI or the ministry concerned shall issue instructions to banks to ensure that the loans considered are not for unauthorised structures and all building laws are followed without any deviation.
There are no two opinions to the effect that unauthorised constructions and encroachment of government land should be prevented by all means.
But, with no disrespect to the guardians of law and the RBI, why should banks alone don the role of the law enforcer, when the government departments are primarily responsible in enforcing civil laws?
Why is a plan allowed to see the light of day if the same is not according to the building laws in force in the area?
Why cannot the departmental officials concerned be held accountable? The deep-rooted corruption and the inadequate punishment to the violators must be tackled first. The ‘stimuli’ for the housing segment, to combat the adverse effect of global financial meltdown, should actually be supported by other measures to reap the full benefit.
K. SUKUMARAN
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