What changed
RBI issued a fresh reminder on September 17, 2007, reinforcing its earlier November 17, 2006 circular on home loans. The directive came after the Delhi High Court Monitoring Committee reported that some banks were still extending loans without checking property authorisation or obtaining required affidavits and sanctioned building plans.
What it means for you
Banks must ensure every home loan branch verifies that the property is authorised and borrowers submit an affidavit with sanctioned building plans. Non-compliance may lead to regulatory action from RBI, as the circular requires strict adherence.
What you must do
- Re-communicate the November 2006 circular to all branches with clear compliance instructions.
- Implement a mandatory pre-disbursal check for authorised structure status and borrower affidavit with sanctioned plans.
- Ensure all branches meticulously adhere to the instructions.
Who it affects
All commercial banks (public and private), Bank branches processing home loan applications, Compliance and risk management teams
What specific documents must banks obtain from home loan borrowers?
Banks must obtain an affidavit from the borrower stating the building is constructed as per sanctioned building plans, and attach those sanctioned plans with the undertaking.
Does this circular apply to private banks and financial institutions?
The circular is addressed to all commercial banks. The Monitoring Committee has requested RBI to convey the directions to private banks and other financial institutions as well.
What happens if a bank fails to comply with these instructions?
Non-compliance may lead to regulatory action from RBI, as the circular advises banks to ensure meticulous adherence.