What changed
RBI advised all NBFCs to file and register records of equitable mortgages created in their favor on or after March 31, 2011, with the Central Registry (CERSAI). Previously, only institutions notified under SARFAESI Act were required to register; now NBFCs must also register such mortgages as and when created.
What it means for you
NBFCs must now proactively register equitable mortgages with CERSAI to make security interests publicly searchable. This reduces the risk of fraud and multiple financing on the same property, enhancing transparency in lending. Non-compliance could expose NBFCs to legal and operational risks.
What you must do
- File all existing equitable mortgages created on or after March 31, 2011, with CERSAI immediately.
- Set up a process to register new equitable mortgages with CERSAI at the time of creation.
- Verify that your loan documentation includes CERSAI registration steps for equitable mortgages.
- Train staff on CERSAI filing procedures to ensure timely compliance.
Who it affects
All NBFCs registered with RBI, Banks and financial institutions not notified under SARFAESI Act, Borrowers and property owners
What is an equitable mortgage?
An equitable mortgage is created by depositing title deeds of a property with a lender as security for a loan, without formal registration. RBI now requires NBFCs to register such mortgages with CERSAI.
What happens if an NBFC does not register with CERSAI?
Failure to register may result in the security interest not being publicly available, increasing fraud risk. While the circular does not specify penalties, non-compliance could invite regulatory action under RBI Act.
Does this apply to mortgages created before March 31, 2011?
No, the circular only applies to equitable mortgages created on or after March 31, 2011. Mortgages before that date are not required to be filed.