BANGIYA GRAMIN VIKASH BANK

Head Office: Berhampore, Murshidabad

CIRCULAR NO: CREDIT/ 37 /2014 Dated: 25.07.2014

All Branches / Offices

All Departments at H.O

Sub: Due Diligence in handling credit proposals related with Creation of Mortgage

Identification of borrower and proper due diligence on the part of the Branch level functionary are very
vital while handling credit proposals linked with equitable mortgage as security. The unscrupulous people
target the branches where the system and procedures are not meticulously complied with or where the
systems and procedures are not adhered to. The bank lawyers give their opinion about genuineness and
acceptability of documents of title to property for creating a valid mortgage by depositing them. On many
occasion it remains silent on various issues that may affect the bank’s interest, which calls for adherence
to general safeguard.

Lack of due diligence on the part of the branch level functionaries caused losses to the Bank in the
following ways:

1. Impersonation/ fake Income / salary certificate/ fabricated income tax returns/ Balance Sheet and P&L
A/c;

2. Submission of fake title deeds of the immovable property to create mortgage for loan availed /
multiple set of a single title deed and creation of mortgage on the same property in favour of more
than one bank or execution of sale-deed in favour of buyer(s) of property not owned by him or execution
of sale-deed of a non-existent property.

3. Depositing of individual title deeds, out of the chain of title deeds pertaining to same property, in
different banks for creation of mortgage against the same identified property.

4. Submission of colored photo copy of title deed, fake stamp paper & non-encumbrance
certificate.

5. Defrauding banks by depositing fake title deeds, Non-purchasing and non-transfer of the flat/
residential property in his name by the borrower in collusion with the private builders/ cooperative
societies.

6. Submission of inflated valuation report and cost estimates.

7. Selling of same house/flat to more than one buyer by the private builders/ co-operative societies and
enabling all of them to raise loan from the banks or Selling the property subsequent to availment of loan
or after availing 1st installment of loan amount, the booking is cancelled in collusion with borrower and
builder/ promoter and the borrower gets refund from the builder/ promoter.
To avoid occurrence of such setbacks, some broad areas are given below for due diligence.
Borrower:
i. Strictly follow KYC norms (Insist on existence /opening of bank accounts). Corroborate address and
other particulars independently.

ii. Contact Bankers to obtain confidential / opinion report. Share all information among the branches of
our bank and other banks. Refer CIBIL information before sanction of any loan.

iii. Obtain recent photograph of borrower / guarantor and verify & ascertain the relationship between
borrower and guarantor.

iv. Obtain IT Return duly acknowledged by IT authority.

v. Undertake cross verification of Balance Sheet with Bank Statement, PAN No. with IT Return.

vi. Obtain Voter’s Identity Card/ Employer’s Photo Identity Card / PAN Card and other proof of document

vii. Undertake personal interview, visit to the site, place of residence & working and preliminary enquiry to
be made regarding the genesis of the proposal. Verify the status of the borrower(s) / mortgager(s) /
guarantor(s) and also the business before accepting any proof of income or document or title
deeds.

viii. Assess present age of the borrower(s)/mortgagor(s) with physical appearance / stature of the borrower
/ mortgagor with reference to verification of the date of deed of conveyance etc.

ix. Make physical inspection of the land / flats / Building and note status report. Road Map of the property
offered as mortgage is to be kept with the loan documents for ready reference.

x. Branch Manager has to obtain certified copy of Deed of Conveyance of property from Registration
Authority and compared with the original one to check genuineness and clearly.

[ NOTE: All photo copies should be tallied with original and stamped “Verified with the
Original “under the signature of verifying Officer with seal ]

Search/Valuation:

i. Searching of records should be for a period covering the date of last conveyance deed or for
previous 13 years whichever is higher.

ii. Verify genuineness of the documents through bank’s empanelled advocates / solicitors. Always
accept the non-encumbrance certificate from the Bank’s approved lawyer directly.

iii. Under no circumstances the borrower(s)/ guarantor(s) be handed over the papers/ documents for
onward transmission to the advocates / solicitors.

iv. Verify the chain of title as will be available from the certificate of lawyer and ascertain that the
lawyer has obtained certified copy of Deed of Conveyance of property from Registration Authority
and compared with the original one to check genuineness and clearly certify such verification in
search report. Expose the title deeds to ultraviolet rays to differentiate between original and
fake title deeds/ agreements for sale. The genuine stamp paper will glow in presence of
ultraviolet rays, while fake one will not glow. Original stamp papers have water-mark while
colored Xerox papers do not have. The genuineness of stamp paper can only be ascertained
from the office of Registration. The amount of stamp duty affixed on documents usually bears a
close co-relation with the consideration/ purchase value as recorded in the deed. Examine this
aspect along with dates of stamp purchased and date of execution.
 v. Undertake verification to ascertain whether schedule of property falls within the jurisdiction of the sub-
registrar of assurance registering the title deeds and if it is not, there is a possibility that the document
tendered is a forged/ fabricated document.

vi. Cause search to Municipal/ Corporation/ Local Panchayat / LRO and obtain receipts towards payment
of municipal tax, land revenue or any other Government/ Municipal/ Corporation Tax from the owner of
the property for verification.

vii. Sub-Register’s office may be approached to verify the genuineness of the stamp papers/ documents/
registration receipts etc. in case of high value loans, through Bank’s lawyer. The land/location map
duly signed and certified by the appropriate revenue authority shall be accepted.

viii. The valuer must indicate in the valuation report the realizable value of the property in case of forced
sale in addition to the value at normal circumstances. The valuer should mention in his valuation
report, which of the documents to the property have been verified by him which will as also serve as
cross-check. The valuer / Architect should enclose a photo of the property verified/valued/estimated
duly signed by him and the borrower. The valuer should also append a location map mentioning four
boundaries, neighbours of the site of the valuation report. To clarify any doubt, the valuation reports
may be closely scrutinized.

ix. Obtain affidavits by the mortgagor swearing that the property in question is free from all
encumbrances, is not subject to any pending litigation or attachment from court or IT/ST or other Govt.
Departments/ Authorities and that there are no documents other than the ones deposited in the bank
etc.

x. The property to be mortgaged in favour of the Bank shall be valued by one approved valuer, and by
two valuers if the proposal involves exposure more than Rs. 25 lac. Such valuation must match with
the eye-estimate of the inspecting Bank officials.

[NOTE: The Branch should engage an empanelled Advocate for searching and provide him
with photocopies of Original Title Deed directly retaining the Original at the Branch. The
Advocate should be advised to provide search report along with the certified copy of title
Deed from Registrar Office. The Advocate searching will be deemed incomplete in absence of
Certified Copy of Title Deed]

Creation of Mortgage:

a. Original Title Deed should always be obtained for creation of mortgage-Registered/Equitable.

b. Where the advance is for purchase of the flat / house/ plot of land, the disbursement should be made
to the seller direct and the title deed should be arranged to be obtained from the Registrar office direct.

c. Financing of the disputed property or the house occupied by the 3rd party or against the property
constructed in an unapproved colony should be avoided.

d. Wherever possible the certified copy of land record with revenue department should be taken along
with original sale deed to ascertain owners’ / mortgagors’ name is mutated in land records.

e. The mortgaged property should be periodically inspected and inspection reports should be kept along
with the documents. This will help the branch to physically identify the property mortgaged during the
recovery proceedings, even if the dimensions and other identification marks mentioned in title deeds
are changed at the site.

All concerned are advised to take note of the above and ensure compliance.

GENERAL MANAGER (Credit)