BL : June 7,2013
To contain fraud, the Reserve Bank of India on Friday asked banks to subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and above to periodic legal audit. They should also re-verify the title deeds with relevant authorities as part of regular audit exercise till the loan stands fully repaid.
Bankers say such a directive may have been prompted by rising bad loans and the necessity to ensure that collateral are sufficient to make recoveries.
The central bank said banks should furnish a review note to their board/audit committee of the board at quarterly intervals on an ongoing basis.
The review note should contain information in respect of legal audits covering aspects such as the number of loan accounts due for legal audit for the quarter, how many accounts covered, list of deficiencies observed by the auditors, and steps taken to rectify the deficiencies.
The note should also mention the number of accounts in which the rectification could not take place, course of action to safeguard the interest of bank in such cases, action taken on issues pending from earlier quarters.
ramkumar.k@thehindu.co.in
(This article was published on June 7, 2013)
Keywords: title deeds and other documents, loan collaterals, periodic legal audit, RBI
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