Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI)
CERSAI is an online central registry in India that tracks security interests, primarily created to prevent fraud in lending against equitable mortgages. Before its formation, individuals could take multiple loans on the same property from different banks due to the fragmented registration system. CERSAI was designed to counter such practices and ensure transparency in property-related financial transactions.
Background:
CERSAI was established as a Government company under Section 8 of the Companies Act, 2013, with its registered office in New Delhi. It is jointly owned by the Indian Central Government, Public Sector Banks, and the National Housing Bank. The registry operates under Chapter IV of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Prior to CERSAI’s formation, borrowers and lenders were the only ones privy to information regarding a property’s encumbrances. This allowed individuals to deceive banks by obtaining multiple loans on a single asset, sometimes using attested copies of title deeds or even fake ones. There were also cases where properties with unpaid loans were sold without informing the buyers about existing liabilities.
Formation:
The idea for CERSAI was first revealed in the 2011 budget speech by Finance Minister Pranab Mukherjee. It became operational on 31 March 2011, under Chapter IV of the SARFAESI Act. CERSAI was registered as a government-licensed company under Section 25 of the Companies Act, 1956. The government holds 51% of its equity, while the National Housing Bank and other public sector banks share the remaining ownership equally.
R.V. Verma, Chairman of the National Housing Bank, served as the first acting Registrar, Managing Director, and CEO of CERSAI while continuing his role at the National Housing Bank.
Objectives and Functions:
- Initial Mandate: CERSAI’s original mandate was to maintain a central registry of equitable mortgages. The registry contains information about the mortgage on a property, the lending institution, and the borrower. This helps lenders check whether a property is already mortgaged before extending further loans.
- Public and Financial Institution Access: CERSAI allows financial institutions to register transactions related to securitisation and asset reconstruction. The registry can be accessed online for a fee by both financial institutions and the general public. However, the general public can only access information related to equitable mortgages. This feature is especially useful for prospective lenders and home buyers, enabling them to verify the status of properties and ensure they are free of any existing loans or encumbrances.
- Expanded Mandate: In 2012, CERSAI’s mandate was extended to include the registration of security interests created through the assignment of accounts receivables or factoring under the Factoring Act, 2011. In January 2016, the scope was broadened further to cover security interests in movable and intangible assets such as accounts receivables, book debts, hypothecation, and other types of mortgages used in India.
Government Directive:
According to government regulations, financial institutions are required to register details of security interests created by them with CERSAI within 30 days of their creation. This ensures that information on property encumbrances is up-to-date and accessible to all concerned parties.