Enhancing Transparency in Lending: Understanding CERSAI in India

Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) plays a pivotal role in curbing fraudulent activities within lending transactions involving equitable mortgages. Established under section 8 of the Companies Act, 2013 by the Government of India, CERSAI aims to identify and prevent fraudulent practices in lending, particularly those involving multiple loans secured against the same asset or property.

Background

CERSAI’s shareholders include the Central Government of India, the National Housing Bank, and public sector banks, with the government holding a majority share of 51%. Before the inception of CERSAI, information regarding a property’s encumbrance was limited to the borrower and lender, leading to instances of multiple loans obtained against the same asset through dubious means. This lack of centralized registration exposed genuine buyers to the risk of purchasing properties encumbered with unpaid loans.

Registration Process

Registration with CERSAI is a straightforward process conducted through its official website. Prospective registrants must complete an electronic registration form available on the website’s ‘Entity Registration’ section, requiring a Digital Signature Certificate (DSC) for access. Upon completion, the form is printed, signed by an authorized signatory, and submitted along with relevant documents to CERSAI’s official address.

Accessibility and Benefits

Accessibility to CERSAI’s registration platform is open to banks, financial institutions, and individuals, subject to a fee. Lenders utilize CERSAI to verify whether any previous security interest exists on an asset before sanctioning a loan, providing transparency and protection to potential buyers. This access enables buyers to ascertain whether a property is free from liabilities created by previous lenders.

Objectives of CERSAI

CERSAI’s primary objectives include maintaining a centralized registry of equitable mortgages, facilitating registration of transactions related to asset securitization and reconstruction, and, since 2012, extending its scope to include registration of security interests created through the assignment of factoring or accounts receivables. Recent expansions have broadened CERSAI’s reach to cover security interests on intangible assets and various mortgage types prevalent in India.

Compliance and Regulations

Registration with CERSAI is mandatory for lenders, as per directives from the Central Government, ensuring that all information regarding security interests on assets or properties is recorded within 30 days of their creation. This comprehensive registration process includes details of loans or mortgages, lenders, and borrowers, enhancing transparency and mitigating risks associated with lending transactions.

Conclusion

In essence, CERSAI serves as a crucial mechanism for promoting transparency and accountability in India’s lending landscape, safeguarding the interests of both lenders and borrowers while fostering confidence in the financial system.