The suggestion was made to the federal government earlier this month after discussions centered on strengthening KYC norms and enhancing fraud prevention mechanisms, in line with two executives conscious of the developments.
“Banks have stated that there was a rise in circumstances the place faux give up worth certificates have been offered, and on that foundation, the next mortgage quantity was availed,” stated a authorities official.
The difficulty will likely be taken up with the insurance coverage sector regulator, the Insurance coverage Regulatory and Improvement Authority of India (IRDAI), stated the official.
“It will likely be mentioned as to how this may be operationalised, and beneath which regulator,” stated the official, who declined to be named.
Underneath current rules, a buyer can take a mortgage in opposition to an endowment coverage, a money-back plan or complete life insurance policies. Lenders supply as much as 80-90% of the give up worth pledged. Final 12 months, IRDAI made coverage loans obligatory for all life insurance coverage financial savings merchandise, permitting policyholders to entry liquidity when wanted.
A senior financial institution govt stated that lenders have additionally reported circumstances the place fraudsters used insurance policies on which loans have been already taken or assigned to different events.
“We now have beneficial a standard insurance coverage repository which is able to allow verification of coverage particulars similar to give up values and project,” stated the banker, including that lenders ought to have entry to such knowledge.
At current there are 4 insurance coverage repositories in India. Earlier this 12 months, CAMS Insurance coverage Repository stated that there was a ‘decisive shift’ in the direction of digital insurance coverage, with greater than 90% of the insurers now issuing insurance policies within the digital mode, and it serviced one crore e-policies.
Final month, Centrico Insurance coverage Repository, a subsidiary of Central Depository Companies Restricted (CDSL), signed an settlement with the Life Insurance coverage Company of India (LIC) to supply digital insurance coverage repository providers.
One other financial institution govt stated that there was a rise in numbers of people taking loans in opposition to insurance coverage coverage because the rates of interest are low as in comparison with private loans.
“Since there’s a collateral the rates of interest are round 9-10% as in contrast with 15% and above on private loans,” he stated.
Earlier this month, monetary providers secretary M Nagaraju held a gathering with key stakeholders, together with monetary establishments and regulators, on the modernisation of the Central KYC Information Registry (CKYCR) and the streamlining of the KYC course of.