RBI Tells Supreme Court It Met Duties in Subvention Scam
Why in the news
After many homebuyers alleged harassment and fraud over misused loans, the Supreme Court is examining how banks and developers ran subvention housing schemes. The RBI filed its response.
Key facts
- Subvention scheme: the bank pays loan money directly to the builder, who must pay EMIs until possession.
- Many builders defaulted on EMIs and construction; banks then chased innocent buyers.
- Court action: CBI probe, plus bar on coercive recovery and cheque bounce cases against buyers.
| RBI point | Detail |
|---|---|
| Affidavit | Regulatory duties under the Banking Regulation Act were fulfilled |
| 2015 guidelines | Disbursal tied to construction stages; none upfront |
| August 2022 circular | Ethical, non-coercive recovery |
| Admission | Banks released funds before verifying progress |
Concerns
- Banks allegedly ignored norms, letting builders siphon funds.
- RBI says enforcement lies in banks’ operational discretion.
Current status
- CBI probe on; RBI denies liability.
- Court likely to fix accountability across regulators, lenders and developers.
Exam angle
- Law cited: Banking Regulation Act.
- Agency: CBI.