What is CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India)?

Sakera Patel S

Introduction

What do you think of when you hear the acronym CERSAI? If you’re like most people, you probably don’t know what it stands for or what it means. The full form for CERSAI is ‘The Central Registry of Securitisation Asset Reconstruction and Security Interest of India.’ This government body will have an increasingly important role to play in India’s economy over the next few years as the country becomes more prosperous and middle-class consumers begin to take out larger amounts of debt.

Continue reading to find out what it means.

Central Registry of Securitisation Asset Reconstruction and Security Interest of India

CERSAI or the Central Registry of Securitisation Asset Reconstruction and Security Interest of India is an online registry that was created by the Government of India in December 2006 as per section 9 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (popularly known as SARFAESI Act). The registry started functioning on April 1, 2007. The primary goal of CERSAI is to bring transparency in the securitization transactions in India and help in reducing frauds involving unauthorized pledging or transfer of assets belonging to financial institutions.

CERSAI is responsible for protecting the interest of investors/lenders while dealing with projects which have already been financed. They ensure that financial institutions have made provisions to recover their money before handing over money to promoters in case a project fails.

It also plays an important role during times when there is a high probability that projects will fail. They ensure that promoters who have misused public funds or who intend to misuse public funds are punished so such instances don’t recur in the future.

The Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) provides information about security interests, as well as securitizations or other asset reconstruction arrangements, to assist in preventing multiple filings for similar assets. In such arrangements, there is an agreement between a lender (secured party) and borrower on which interest payments are secured with another asset. In case the borrower defaults on these loan payments, the secured party wants to sell the collateral. Before selling these assets, he has to register himself with CERSAI; otherwise, he will face legal consequences. So CERSAI’s role here is that by registering himself here the seller can avoid any legal issues while selling his collateral in the future.

CERSAI, or Central Registry of Securitisation Asset Reconstruction and Security Interest, is an online platform that keeps track of all securitized assets issued by banks.

Now that may not sound very exciting but there are three important reasons why you should care about CERSAI.

First, this initiative was started to address a few fundamental flaws with our existing system for mortgages.

Second, CERSAI allows for better tracking of mortgage documents as well as improving legal disputes related to foreclosure.

Finally, since lenders were already scanning documents electronically in preparation for rollout CERSAI should be able to provide users with a more streamlined system from which to obtain their information.

Conclusion

CERSAI or Central Registry of Securitisation Asset Reconstruction and Security Interest was set up under SEBI (Securities Exchange Board of India) regulation to act as a central repository for tracking all CRAM(Collateralized/Asset-Backed Securities) transactions. Since 2009, CERSAI has issued guidelines on timely reporting of new issuance in a standardized manner which have helped in bringing about transparency in the asset-backed securities market. When buying these securities investors can look at various indicators like ratings by rating agencies such as ICRA, CRISIL, etc. issued based on information published by CERSAI.

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