LEGAL POLICY / PROCESS NOTE

FOR
R E F I N A N C E O F L O A N S P O L I C Y B A C K G R O U N D A N D R AT I O N A L E

In recent times we have been receiving cases for funding, which are in the
nature of refinancing the loans already availed from various
Banks/Institutions. In the past, Branches have faced problems with regard
to receiving the title documents from the Banks/Institutions. It has also been
observed that different Branches are adopting different processes and
practices for the same. Under the circumstances, in order to ensure that the
risks associated with funding refinance cases are adequately covered /
mitigated and also to adopt a uniform process / practice across the Branches
pan India, it has been considered prudent to have a Guideline Policy and
clear process. The Guideline Policy also provides necessary documentation
to be put in place in this regard.

POLICY / PROCESS NOTE

1. At the Application stage, a letter be taken by the Borrower stating and

representing that apart from the Loan being refinanced there is no other
borrowing of any nature whatsoever with the Bank/Institution whose Loan
is being refinanced.

2. In case the Customer has a Bank Account in the same Bank, it should
be clarified that there is no demand outstanding from the Bank.

Rationale for 1 & 2 above

This is for the reason that in case there is any other borrowing and/or
deficit amount from the Account, the Bank will be within its right to
withhold title documents under the Bankers’ Lien.

3. During the Credit Appraisal, please obtain photocopies of the title

d o c u m e n t s r e l a t i n g t o t h e P r o p e r t y.

4. First attempt should be made to analyse the possibility of:

a . Ta k i n g s a m e o t h e r i m m o v a b l e property of the Borrower as

i n t e r i m s e c u r i t y.

b. Exploring the possibility of having collaterals like Fixed

Deposits / Shares and/or other investments.
5. After having analysed and explored the possibility of having interim
s e c u r i t y, i r r e s p e c t i v e o f t h e f a c t w h e t h e r t h e s a m e i s a v a i l a b l e o r n o t ,
following processes and documentation needs to be adopted:

a . P l e a s e t a k e t h e d u l y e x e c u t e d a n d a ff i r m e d o n o a t h Tr u s t
Receipt and Indemnity as per draft enclosed as Annexure – A
to this note.

b. Please take a letter duly signed by the Borrower in the format

Annexed as Annexure – B to this note which should be
addressed to the Bank whose loan we are refinancing.

c. Please take letter enclosing cheque for the entire amount

disbursed along with a covering letter as per format enclosed as
Annexure – C to this note.

d. Forward disbursement cheque to the concerned Bank along with

the covering letter addressed to the Bank as per format
enclosed as Annexure – D to this note.

e. In case the original title documents are not forthcoming,

security should be created considering deposit of the
photocopies of the title documents along with the tax payment
receipt of the property and “Non Encumbrance Certificate”.

[This would still amount to security being created in light of

ruling by Division Bench of Kerala High Court in the matters of
I n d i a n B a n k v. B o m b a y H a r d w a r e s & S a n i t a r y S t o r e s , 2 0 0 1 ( 4 )
C C C 4 1 2 ( 4 1 5 ) : 2 0 0 1 K LT 2 7 3 ( K e r ) a n d A s s i a m m a v. S t a t e
Bank of Mysore, ILR 1992 Ker 43 (Ker-DB)]
 ANNEXURE – A

Mr KVS SAIKRISHNA , age 43 yrs R/o Flat no 503, 5 TH Floor ROYAL TANZANITE, Survey No.
81,82,84 & 85. MADINAGUDA, SERILLINGAMPALLY, HYDERABAD. TELANGANA. &
Ms.KHANDAVILLI VARALAKSHMI R/o Flat no 503, 5TH Floor ROYAL TANZANITE, Survey
No. 81,82,84 & 85. MADINAGUDA, SERILLINGAMPALLY, HYDERABAD. TELANGANA.
hereinafter referred to as the " Borrower" which expression shall, unless
it be repugnant to the subject or context thereof mean and include his / her /
their respective heirs, legal representatives, executors, administrators and
permitted assigns).
T h e B o r r o w e r d o s o l e m n l y a ff i r m u p o n o a t h a s u n d e r :

1. The Borrower has/have availed a loan of Rs. __________/- (“ Facility”)

f r o m D E WA N H O U S I N G F I N A N C E C O R P O R AT I O N LT D . ( “ I n s t i t u t i o n ” )

2. The Borrower propose to liquidate the Facility (“ the purpose”) by

availing a loan from Housing Development Finance Corporation
Limited company incorporated under the Companies Act, 1956, and
having its registered office at Ramon House, 169, Backbay
R e c l a m a t i o n , H . T. P a r e k h M a r g , C h u r c h g a t e , M u m b a i – 4 0 0 0 2 0 a n d
branch office at Basheerbagh (“ HDFC”).

3. HDFC has granted a loan for the said purpose on such terms and
conditions as stipulated in Loan Agreement dated __________
(hereinafter referred to as “ the Loan”).

4 . I n o r d e r t o s e c u r e t h e F a c i l i t y, t h e B o r r o w e r h a s / h a v e c r e a t e d s e c u r i t y
interest in favour of the Institution over the property more particularly
detailed in Annexure-1(“said property”). All the original title
documents (“said documents”) pertaining to the said property are/is
in the custody of the Institution which is further confirmed by their
letter dated __________ enclosed hereto as Annexure-2.

5. That on HDFC agreeing to disburse the Loan so granted, the Borrower

have agreed that the Loan shall/will be secured by creation of security
interest in such form and manner as satisfactory to HDFC on the said
property or on any other property (moveable or immoveable) as would
be deemed fit and necessary by HDFC.

6 . T h a t o n l i q u i d a t i o n o f t h e F a c i l i t y, t h e s e c u r i t y i n t e r e s t c r e a t e d i n f a v o r
of the Institution shall stand released and simultaneously the security
interest in favor of HDFC shall stand created by me/us.
 7. That there are no statutory charges or any such other dues payable by
me/us which has an effect of getting attached to the said property
during the interim period of release of the security interest created in
favor of the Institution and recreation of security interest in favor of
HDFC.

8. That the said documents pertaining to the title of the said property
which is/are in the custody of the Institution shall be collected by
me/us and such collection by me/us of the said documents shall be
purely under the atonement by HDFC and shall be received and held in
trust for the benefit of HDFC with respect to the security interest
recreated in favor of HDFC.

9. That on receipt of the said documents the Borrower shall not deal in
any manner whatsoever with the said documents save and except
holding it under atonement of HDFC and in trust for the beneficial
security interest recreated in favour of HDFC.

10. That the mere act of collection and holding the said documents by
me/us shall not amount to having actual possession of the said
documents in law by me/us and the Borrower agree that the act of
receiving and holding the said documents from the Institution shall be
deemed to be and shall have effect of holding the said documents by
way of constructive possession for and on behalf of HDFC.

The Borrower agree that the act of HDFC disbursing the Loan as an act of
Uberrima Fides and of utmost good faith on the undertaking and
representations given by me/us here and before.

Signed by……….

Before Me
Notary Public
 ANNEXURE – B

Date:

D E WA N H O U S I N G F I N A N C E C O R P O R AT I O N LT D

Hyderabad

D e a r S i r,

This is with reference to my loan bearing Loan A/c No.HF-……………. (“ the

said Loan”) I have with you and my intention to repay the said Loan.

I a m a w a r e a n d c o n f i r m t h e c o n t e n t s o f H D F C ’s l e t t e r d a t e d _ _ _ _ _ a d d r e s s e d
to you with regard to repayment of the said Loan by way of a cheque for the
amount of Rs.___________ in full and final payment of the said Loan. On
the repayment being made to you, you are authorized to deliver the title
documents (as detailed in Annexure – 1 to this letter) to me or _________ in
the capacity of Authorised Agent of HDFC and the security creation in your
favour will stand released.

F u r t h e r, t h e d e l i v e r y o f t h e t i t l e d o c u m e n t s t o m e o r _ _ _ _ _ a s a n A u t h o r i z e d
Agent of HDFC would be construed as a valid return of the title documents to
me in my personal capacity and you shall be validly discharged of your
obligations of returning the same to me.

Yo u r s f a i t h f u l l y,

Encl: a/a
 ANNEXURE - 1
[ L i s t o f Ti t l e D o c u m e n t s i n t h e c u s t o d y o f t h e B a n k ]
 ANNEXURE – C

Date:

Housing Development Finance Corporation Limited

Hyderabad

D e a r S i r,

This has reference to my loan application for refinance under the refinance
s c h e m e . O n m y r e p r e s e n t a t i o n a n d a ff i d a v i t o n o a t h a s m o r e p a r t i c u l a r l y
detailed in Annexure – 1 to this letter you have agreed to sanction the same.

As an additional assurance of my undertaking that I would create security

interest, I have agreed to place the enclosed cheque No.______ dated _____
for an amount of Rs.______ in favour of HDFC as a collateral to my affirmed
assurance that the security interest shall be created in such manner as
deemed fit by HDFC.

I undertake to maintain sufficient balance in my Account out of which the

enclosed cheque has been issued and HDFC shall be within its right to bank
the same. In the event the security is not created on or before _____ and/or
the same is being objected to by any person, you may deposit the cheque for
encashment without any further notice and/or intimation to me in this regard.
I further undertake not to give stop payment instruction to my Bank in this
regard.

Yo u r f a i t h f u l l y,

Encl:a/a
 ANNEXURE – 1
[ C o p y o f d u l y a f f i r m e d o n o a t h “ Tr u s t R e c e i p t c u m I n d e m n i t y ” ]
 ANNEXURE – D

Date:30/10/14

Housing Development Finance Corporation Limited

Hyderabad

D e a r S i r,

Mr KVS SAIKRISHNA , age 43 yrs R/o Flat no 503, 5 TH Floor ROYAL TANZANITE, Survey No.
81,82,84 & 85. MADINAGUDA, SERILLINGAMPALLY, HYDERABAD. TELANGANA.
Ms.KHANDAVILLI VARALAKSHMI R/o Flat no 503, 5TH Floor ROYAL TANZANITE, Survey
No. 81,82,84 & 85. MADINAGUDA, SERILLINGAMPALLY, HYDERABAD. TELANGANA.
(“the Borrower”) whose KYC Identification is enclosed as Annexure – 1 with
a request for availing a housing loan (“ the said Loan”) under our refinance
scheme. The Borrower had represented that the said Loan so applied shall
be fully utilized for the financing of loan availed by the Borrower from
yourselves on such terms as stipulated in the Loan Agreement dated
_______. A copy of the same is enclosed as Annexure – 2. [Please enclose
a copy of the Loan Agreement between the Bank and the Borrower]

The said Loan needs to be secured by creation of security interest over the
p r o p e r t y ( “ t h e s a i d P r o p e r t y ” ) a s d e t a i l e d i n A n n e x u r e – 3 t o t h i s L e t t e r. A l l
the original documents pertaining to the title of the said Property (as
d e t a i l e d i n A n n e x u r e – 4 ) i s i n y o u r c u s t o d y. T h i s c o m m u n i c a t i o n i s a m o d e
of forwarding the refinance Loan cheque for an amount of Rs.________ (“ the
cheque”) in your favour to ensure the utilization as well as to confirm and
e x p e d i t e t h e s e c u r i t y c r e a t i o n i n o u r f a v o u r.

The fact and act of acceptance of this cheque by you shall confirm and
declare as under:

1. That in addition to the amount mentioned in the cheque i.e. Rs.____,

you have no other outstanding as against the Borrower on any account.

2. That you have no further security interest in the said Property and the
security interest created in your favour by the Borrower stands released
on receipt by you of the amount by way of the cheque.

3. That you would be handing over the title documents pertaining to the
said Property to _______ and/or the Borrower in the capacity of
Authorised Agent of HDFC.
 4. That the act of your handing over the title documents shall be
construed as valid delivery to Authorised Agent of HDFC under valid
authorization and consent by the Borrower to do so and the same shall
discharge you of the obligations of returning the title documents to the
B o r o w e r. A c o p y o f t h e l e t t e r a u t h o r i z i n g y o u f o r t h e s a m e b y t h e
Borrower is enclosed as Annexure – 5.

5. That retention of documents pertaining to the title of the said Property

by you, after having accepted the cheque, would amount to holding the
same in trust for HDFC as well as a constructive delivery by the Borrower
to yourself with an intention to create security interest in favour of HDFC
for the said Loan.

Yo u r s f a i t h f u l l y,
For Housing Development Finance Corporation Limited

Encl: a/a
 ANNEXURE – 1
[One KYC Identification of the Borrower]

ANNEXURE – 2
[Loan Agreement between Borrower and the Bank / Institution whose
loan is getting refinanced]

ANNEXURE – 3
[Details of Property]

ANNEXURE – 4
[ L i s t o f Ti t l e D o c u m e n t s i n t h e c u s t o d y o f t h e B a n k ]

ANNEXURE - 5
[Letter from the Borrower addressed to the Bank as per Annexure – B of
the Policy Note]