The National Housing Bank on April 26, 2023, notified regarding the Early Warning Signals Framework in HFCs.
According to an analysis of the frauds reported by the HFCS, the grounds for accounts being detected as fraudulent are seller impersonation, submission of fake income/employment documents, submission of fake title deeds, a collaboration of the builder and borrower, and so on. It has also been noticed that such inadequacies are only discovered when the borrower stops paying the EMIS after the loan has been disbursed.
In view of the above, it has been decided that an Early Warning Signals (EWS) Framework should be adopted by the HFCs so that an alert is triggered before the account turns into Non-Performing Asset (NPA) or is declared as a fraud account. Tracking of the EWS must be integrated with the Credit Monitoring Process in the systems of the HFCS so that it becomes a continuous activity. Through the EWS framework, HFCs will be encouraged to take into account Fraud Risks in their Risk Management Practices.
A suggestive list of EWS indicators is given in Annexure. The list is indicative and HFCs are advised to add other EWS indicators based on their experience.
[Circular No. NHB(ND)/DOS/Sup. Circular No.9/2022-23]
