Legal Audit of title documents in respect of large value loan accounts in Indian Banks

A new type of regular audit has been introduced by Reserve Bank of India i.e Legal Audit.

Reserve Bank of India vide Notification No RBI /2012-13/524 BS.FrMC.BC.No.7/23.04.001/2012-13 dt.June 07, 2013 has advised Banks:

  • To subject the title deeds and other documents in respect of all credit exposures of Rs5 crore and above to periodic legal audit
  • re-verification of title deeds with relevant authorities as part of regular audit exercise, till the loan stands fully repaid.


Further, the banks have to furnish a review note to its Board/Audit Committee of the Board at quarterly intervals.

Earlier, vide para 3.1 of our circular DBS.CO. FrMC. BC .No. 11/ 23.0.001/ 2010-11 dated June 30, 2011 banks had  to put in place a system wherein the concurrent auditors were required to look into and report, inter alia, on the genuineness of the title documents especially for large value loans.

The fresh requirement is in addition to the scrutiny of the Title Deeds by the Concurrent Auditors. The normal practice of Auditors is to verify the documents relating to the Audit Period only. Normally, the audit period starts from the last audit date to the present date.

Hence, Title Deeds audited during previous audit periods were not audited once again.

RBI in a study of large value frauds, particularly when the branches were also under concurrent audit, has found that large numbers of frauds were perpetrated on account of submission of forged documents by the borrowers. Hence the concept of repetitive audit for Large Value Loans has been mandated by RBI.  It is hoped by such an exercise the NPA rate will be reduced

One thought on “Legal Audit of title documents in respect of large value loan accounts in Indian Banks”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s