RBI stays mute but must be held responsible
An interesting aside to the controversy at United Bank of India is that no political party or opposition leader has questioned RBI or the finance ministry on the rapid decline of this bank, for a second time. A hallmark of the United Progressive Alliance’s regime is that the crony club of politicians and industrialists covered the entire political spectrum, including the main opposition parties. Various mega-scams under the UPA, such as loot of natural resources and infrastructure contracts structured as public-private-partnerships, were funded by massive loans from public sector banks. Academic articles on RBI’s own website confirm that the sharpest increase in bad loans, since the turn of the century, happened in 2012 and 2013; in these two years, the incremental accretion to bad loans trebled compared to 2011 and earlier.
Power and infrastructure were the two sectors that saw the sharpest increase in bad loans since 2012; most of these are with public sector banks. With general elections a few weeks away, bankers are now turning bold and admit to pressure from the ruling coalition to keep lending to these sectors and to favoured industrialist-politicians.
Why has RBI remained a mute spectator to the sharp escalation in bad loans over the past five years? RBI, as India’s monetary authority and banking regulator, is never held accountable for its many lapses in supervision or its spending. A retired central banker says, from chief general manager upwards, most central bankers are far too busy logging frequent flying miles and garnering fat daily allowances. Many enter the Mint Street headquarters only to submit their vouchers before taking off again. That is one reason why policy decisions take forever and there is little time to discuss and analyse inspection reports about banks.
More murky details about the ex-CMD of UBI
The goings-on at United Bank of India (UBI) have been quickly suppressed after Archana Bhargava suddenly opted for voluntary retirement from the post of chairman & managing director (CMD). The mainstream media has also allowed the story to die.
But information trickling out of UBI and Canara Bank reveal that RBI governor, Dr D Subba Rao and the finance ministry had received several complaints against Ms Bhargava during her Canara Bank stint, but the charges were buried with a perfunctory investigation that allowed her to evade responsibility.
In November 2012, RBI was informed about how Ms Bhargava and AK Gupta, both former colleagues at Punjab National Bank, were at loggerheads in their capacity as executive directors of Canara Bank. This was causing dissonance and loss of morale in senior management. Some general managers even preferred to opt for voluntary retirement.
These battles escalated after the exit of former chairman S Raman leading to an ‘alarming’ decline in the Bank’s performance prompting a board member to write to the government. Isn’t it strange that, despite this feedback from a well-regarded director, Ms Bhargava was appointed CMD of UBI?
This was only one of the complaints. A Central Vigilance Commission inquiry into a complaint about branch officers being forced to buy gifts for Ms Bhargava was closed after accepting her version, because only one out of nearly 50 persons examined by the vigilance contradicted her version. Ms Bhargava was seen as politically powerful and bankers were scared of being victimised. Her subsequent appointment only proved the point. A video-recorded complaint by the jewellery firm Rajesh Exports about a demand for bribe was also closed as unsubstantiated.
A very basic and preliminary due diligence on property title can be carried out by the buyer herself before appointing a lawyer
At the Moneylife seminar ‘Invest Profitably in Stocks & Bonds’, many asked why not ‘real estate’? During the four-hour session, Debashis Basu, editor & publisher of Moneylife took attendees, including me, through the pitfalls of investing in stocks and bonds and we all hoped for similar guidance on real estate and art.
To quote Donald Trump on Real Estate: “It's tangible, it's solid, it's beautiful”. But for most of us investing in real estate is expensive, usually done on borrowed money, and sour for the want of a clear title. However, a very basic and preliminary due diligence on title of the owner can be carried out by the buyer himself; before he appoints an advocate.
Here are some general guidelines…
No interest in immovable property can be created without a document that is duly registered with the office of the Sub-Registrar of Assurances. Since April 2013, even equitable mortgages by deposit of title deeds are required to be registered. Each time a document is registered, the Sub-Registrar of Assurances issues Index II.
The Government of Maharashtra has carried out a lengthy exercise of computerizing all such documents from 2002 to date. Usually one must go as far back as 30 years whilst taking such searches at the Sub-Registrar of Assurances. These days, such searches can also be made online; try the Department of Registration and Stamps’ site . Professional search clerks, available dime a dozen, usually undertake this exercise, but at a cost.
Everything is just a click away. If the seller is a company, one can easily go to the site of Ministry of Corporate Affairs and get a confirmation on whether or not the property is mortgaged or charged.
Property Card is a basic document maintained under the provisions of the Maharashtra Land Revenue Code. For properties beyond the city limits, a 7/12 extract is maintained. It, amongst other things, discloses the name of the owner/ holder of the plot. Try http://prcmumbai.nic.in/prcmumbai/jsp/propertyNew.jsp for plots in Mumbai.
As far as searches at the Sub-Registrar of Assurances are concerned, the starting point is the Cadastral Survey number and Revenue Division. This can be obtained from any document of title.
All of the above is in public domain, available for a nominal fee, and to just about anyone.
Public Notice is a very good way of finding out how sure the owner is of his title. Usually sellers, who express apprehension about issue of public notices, have something up their sleeve or hidden in the closet.
In a case concerning a prime property in a metro city in India, as many as 80 objections were, not long time ago, received to a Public Notice. Cousins, parties having rights under memoranda of understanding, agreements or power of attorney, all laid a claim: a real labyrinth.
Brokers in Mumbai cry themselves hoarse announcing 48% of the buildings do not have occupancy certificates (OC). The Municipality is not bound to issue OC if things are not in order. The builder may not have made provisions for electricity or water supply. The consequences of occupying any premises without an OC are on person in actual use, occupation and possession.
In case of under-construction flats, at the very least, check the intimation of disapproval (IOD), lay-out plans, and the commencement certificate (CC). The former being one of the first building sanctions and the OC being the last one. Just obtaining these is not sufficient, identify thereon your property and understand them. It’s no neuro science.
Under the provisions of Maharashtra Ownership of Flats Act, 1963 (MOFA) a developer is bound to produce all of the above together with a title certificate from an advocate.
Interestingly, Maharashtra Housing (Regulation and Development) Act shall replace Maharashtra Ownership of Flats Act, 1963. Nevertheless, do not hesitate to exercise what’s rightfully yours.
Whilst perusing the documents of title-agreement of sale, sale deed and deed of apartment, trace the root of title right down to your seller without getting intimated by the legalese.
Ensure that the share certificate issued by the co-operative housing society (CHS) reflects the name the owner. Look for restrictive covenants in the bye-laws of the CHS or condominium.
These are just a few tips that may be of good use. In the meantime, the author is still hoping that Moneylife would soon cover real estate and art, as a form of investment, the way it covered bonds and stocks. Those who agree may kindly paste a comment and let the cry be heard. J
(Divya B Malcolm is a senior associate with Kochhar & Co. The views expressed are her own and not to be construed as legal advice.)