CERSAI
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India, often referred to as CERSAI, is a government-owned entity created to oversee a central registry for all securitisation, asset reconstruction, and security interest transactions within India. It plays a vital role in promoting transparency in the credit system and in preventing fraudulent activities that involve multiple loans against the same asset, particularly immovable properties like land and buildings.
CERSAI was established under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. It commenced operations on March 31, 2011, with the aim of developing a central database where financial institutions, including banks and non-banking financial companies (NBFCs), can register information about secured loans provided to borrowers. This encompasses details regarding the asset used as collateral and the rights of lenders concerning that asset.
Prior to the establishment of CERSAI, India lacked a consolidated platform for documenting all security interests created on properties. Consequently, there were instances where borrowers used the same asset as collateral for multiple lenders, resulting in fraud and disputes. CERSAI fills this void by providing a centralized, transparent, and accessible registry that lenders can refer to before approving loans.
The registry includes information pertaining to security interests in both movable and immovable properties, vehicle hypothecation, equitable mortgages, assignment of receivables, and specifics of loans secured against properties. Financial institutions must register their security interests with CERSAI within a specified timeframe. Non-compliance may lead to penalties and could undermine the lender’s claim in the event of default or legal conflicts.
In addition to financial institutions, other creditors, including housing finance companies and cooperative banks, are required to register with CERSAI. The information recorded on this platform is available to the public for a small fee, allowing prospective lenders, buyers, and investors to verify if a specific asset is already encumbered by a charge or lien. This greatly mitigates the risk of fraud in credit transactions.
Over the years, CERSAI’s role has evolved. In 2016, it was given the task of managing the registry of equitable mortgages, which is a prevalent type of mortgage in India where the borrower hands over title deeds to the lender as collateral. By 2017, CERSAI’s responsibilities were further broadened to encompass the registration of the creation, modification, and satisfaction of security interests in intangible assets, including intellectual property rights and financial assets.
CERSAI is overseen by a board of directors that includes representatives from the Ministry of Finance, the Reserve Bank of India (RBI), and selected public sector banks. It functions as a Section 8 company, indicating that it is a non-profit entity under the Companies Act, 2013. While it is a government initiative, it operates based on the fees charged to users for registration and search services.
A significant advantage of CERSAI is the protection it provides to lenders. When a lender registers its interest with CERSAI, it secures priority over the collateralized asset in case of borrower default or bankruptcy. This legal priority guarantees that the registered lender has the first claim to recover dues from the asset, taking precedence over unregistered lenders or other claimants.
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The platform additionally aligns with the government’s goal of facilitating business operations by reinforcing the legal structure governing secured lending. By offering a searchable public database of security interests, CERSAI improves due diligence and encourages responsible lending practices.
In summary, CERSAI plays a crucial role in India’s financial and legal framework. It fosters transparency, mitigates fraud, protects the interests of lenders, and aids in creating a more robust credit environment. As the financial landscape becomes increasingly intricate and digital, CERSAI’s role will further develop, bolstering both economic stability and financial inclusion.
