Be more vigilant of developers' escrow accounts: UP RERA asks banks

The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) Thursday said it has sent letters to the zonal heads of all 42 banks to be more vigilant of the escrow accounts of the promoters and developers.

A copy of the letter has also been sent to the director general of the Directorate of Institutional Finance, Government of Uttar Pradesh, UP RERA said in a statement.

The authority has asked banks for strict compliance of the provisions of Section-4 (2) (I) (D) of RERA Act, 2016, which warrants 70 per cent of amounts realised for real estate projects to be deposited in a separate account and to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for limited purposes.

UP RERA Chairman Rajive Kumar said, "It has come to the notice of the Authority that some of the promoters are not complying with the statutory provisions of the law and withdrawing the amount from the designated account without submitting the requisite certificate. This is grave violation of the mandatory provisions of the Act." UP RERA Secretary Abrar Ahmed said the separate accounts related to 2,651 projects registered in RERA are being maintained in 962 branches, some of them are based out of Uttar Pradesh. "We have sent separate individual letters to all the 962 branches by speed post." It has also come to the notice of the Authority that some of the banks, especially the ones that have sanctioned loan to the promoter, arbitrarily adjust the entire amount deposited in the account against the outstanding loan of the promoter instead of transferring 70 per cent of the money collected to the escrow account for the purposes of construction and payment of the cost of land of the project, the statement said.

"The banks are requested to issue necessary instructions to all of the regional managers, deputy general managers, assistant general managers (and) branch managers to strictly comply with the provisions," Ahmed said.

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It is further clarified that if the banks do not adhere to the provisions of the Act, the matter will be brought to the notice of the chairman of the respective banks and the secretary of the banking department of the Government of India for appropriate action in the matter.

In total, there are 42 scheduled commercial banks -- 21 each public sector and private sector lenders.