CERSAI 2.0: A Preliminary Guide

-Mahesh Jethani (finserv@vinodkothari.com)

All Scheduled Commercial Banks (including RRBs), Small Finance Banks, Local Area Banks, all Co-operative Banks, all NBFCs and All India Financial Institutions are required register creation of security interest over an asset with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI).

An upgraded version of Security Interest portal i.e. CERSAI 2.0, is going to be released on August 3, 2020, which shall introduce some novel changes such as the offline functionality for adding security interest transactions and no maker-checker concept. In the following writeup we intend to explore the legal requirements for registering on CERSAI 2.0 and the process of registration along with scenario before and after the portal goes live.

The registration process is based on the limited study of the user manual for registration provided on the website of CERSAI.

Legal Requirement for Registration on CERSAI

The objective behind setting up of CERSAI is to have a centralised database for security interests provided in favour of financial institutions. For this purpose, various regulations require the financial/lending institutions to register creation of security interest, which are as follows:

RBI Guidelines and Notifications

Para 108 of Master Directions for NBFC-SIs[1] and para 94 of Master Direction for NSIs[2] makes it mandatory for applicable NBFCs to file records of equitable mortgages with the CERSAI.

Further, a notification[3] issued by the RBI, requires NBFCs to register the following, in addition to the security interest (mortgage) created through deposit of title deeds –

  1. Security interest in immovable property by mortgage other than mortgage by deposit of title deeds;
  2. Security interest created by way of hypothecation of plant and machinery, stocks, debts including book debts or receivables, whether existing or future;
  3. Security interest in intangible assets, being know how, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature;
  4. Security interest in any ‘under construction’ residential or commercial or a part thereof by an agreement or instrument other than mortgage.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

The SARFAESI Act regulates securitisation, reconstruction of financial assets and deals with enforcement of security interest. Section 23 of the Act reads as under:

“The particulars of every transaction of securitisation, asset reconstruction or creation of security interest shall be filed, with the Central Registrar in the manner and on payment of such fee as may be prescribed“

Accordingly, all transactions of securitisation and asset reconstruction and creation of security interest are required to be registered.

CERSAI 2.0- Entity Registration Process

The Entity Registration functionality shall be accessible on the CERSAI 2.0 portal. In order to register details of security interest and access various functionalities available on the portal, entities must be registered. Post implementation of chapter IV-A of SARFAESI Act entities are broadly classified into three main categories –

  • Secured Creditors
  • Other Creditors
  • Revenue Authorities

Secured Creditors

The secured creditors can be any of the following entities- Public Sector Banks, Private Sector Banks, NBFCs, Security Trustees, RRBs, Cooperative Banks, ARCs, Factoring Companies, etc. Following shall be the registration process for secured creditors:

  1. On the portal Open Entity Registration Form using path Entity Registration -> Entity Registration
  2. User will get the following two modes of Entity Registration
    1. via CKYC
    2. via Digital signature

In case digital signature option is selected, it shall be ensured that the user has a valid Class III digital signature while registering the entity in the CERSAI 2.0 portal.

It is to be noted that users which are already using Digital Signature in CERSAI 1.0 can continue to use the same in CERSAI 2.0 also (irrespective of the class of Digital Signature) and once their Digital Signature expires they will have to procure a new Digital Signature of Class – III.

  1. The CERSAI 2.0 system will not enforce digital signature for the users with following roles: – Asset based Search – Debtor based Search – AOR search – Online Reports – MIS Reports – RMS Reports – Batch Reports. Except the above-mentioned roles, Digital Signature is mandatory for all other roles to login in CERSAI 2.0 system.
  2. Once the entity fills in the details such as employee Id, username, email ID, mobile number, date of birth, it can submit the form.
  3. Upon submission, an Entity Registration Form will open. The Form is divided into 3 tabs.
    1. First Tab is Entity User Details, which captures information related to the Entity which is being registered in CERSAI 2.0 portal.
    2. Second tab is Primary User Admin (PUA) 1 which captures information related to PUA1 of the Entity.
    3. Tab 3 captures the details of PUA2 of the entity.
  1. In the first tab, there is dropdown menu for Entity Category, which provides the following options to choose from:
    • Secured Creditor
    • ARC
    • Factoring Company
    • Revenue Authority
    • Other Creditors

The applicant shall select the appropriate category based on its nature of business.

  1. After selecting the entity category, the applicant shall choose from the drop down menu for Type of Entity, which has the following options:
    • NBFC Accepting Public Deposit
    • NBFC Not Accepting Public Deposit
    • Public Sector Bank
    • Private Bank
    • Foreign Bank
    • Intermediary
    • Housing Finance Company
    • Regional Rural Bank
    • Co-operative Bank
    • Security Trustee
    • Financial Institution
    • Local Area Bank
  2. After selecting the relevant category and entity type, and filling the mandatory details such as name, PAN, GSTIN, registration number, entity registration date, address and mail id, the applicant shall select the relevant role for which the registration is being done- such as Assignment of Receivable, Asset Reconstruction, Asset Search, AOR Search
  3. In second and third tab, the details of primary users are captured. The following mandatory details are required to be given: username, father/mother name, employee ID, email id, mobile number, date of birth, department and residential address. After filling the required details, form shall be submitted.
  4. Upon Submission, system will save the entity registration request in pending state and give a reference number to the user for tracking the entity registration request. The user shall then download the entity registration filled-up form, attach supporting documents and send to CERSAI office offline.
  5. Upon receiving the physical documents, CERSAI admin users will fetch the transaction from their Entity Registration queue and approve the request upon verifying the request against the physical documents sent by the user. If CERSAI admin user’s approval, the entity will be registered successfully, and system will send notification to the PAUs. However, if the CERSAI admin user rejects the request, the entity representative user will have to apply afresh.
  6. On successful registration of the entity, Entity Code will be generated, and system will automatically create two notional accounts for the entity in the Central Registry portal – Usable account and TDS Account.

Other creditors

In the other entities section, the following kinds of creditors may register themselves:

  • Individuals
  • BOI
  • HUFs
  • Sole Proprietorship.

The initial process shall be the same as that of registration of secured creditors (as explained above). However, the primary user tab shall not be there.

After filling all the mandatory fields and upon submission of the form, a link shall be generated for creation of password which shall be sent to the user email id provided while filling form.

After clicking on the said link, the user will enter User ID for which password need to be set. A Set Password Form will open and after filling all the mandatory fields and clicking on Reset button the password will be reset successfully.

User registered in CERSAI 2.0 portal, using Entity Registration – OC can now access the CERSAI 2.0 application using newly created User Id and Password.

Conclusion:

The new portal has come up with the solutions to technical flaws in the existing portal. However, it is yet to be seen if the CERSAI 2.0 brings some revolutionary change or is it just limited to technical upgradations. The CERSAI has also stopped taking registration requests till the new portal goes live. The registration process may have other knick knacks which shall come out once the process is operative.

 

[1]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MD01092016B52D6E12D49F411DB63F67F2344A4E09.PDF

[2] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF

[3] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11439&Mode=0

 

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