Banks Giving Loans Without Proper Title Search Reports : Supreme Court Flags Issue To RBI; Says Officials Who Approved Loan Be Made Liable

The Supreme Court recently underscored the significance of comprehensive title search reports in preventing legal disputes and ensuring smooth property transactions.

The Court emphasized the need for the Reserve Bank of India (RBI) and other stakeholders to develop a standardized and practical framework for preparing title search reports before loan sanctioning by banks. The Court said that the framework should also include the determination of liability of the erring bank official who sanctioned the loan based on a faulty title search report.

“we deem it necessary to observe that Banks should remain very careful with inadequate title clearance reports, more particularly, when such reports are obtained cheaply and at times for external reasons. This concerns the protection of public money and is in the larger public interest. Therefore, it is essential for the Reserve Bank of India and other stakeholders to collaborate in developing a standardized and practical approach for preparing title search report before sanctioning loans and also for the purpose of determining liability (including potential criminal action) of the Officer who approves loan. Additionally, there should be standard guidelines for fees and costs associated with title search reports so as to ensure that they maintain high quality.”, the Court said.

Until now, there's no standard mechanism developed by the RBI that regulated the title search report before loan sanctioning by banks. The banks rely on the title search report prepared by the empaneled lawyers, and there's no standardization of title search report preparation.

The bench comprising Justice JB Pardiwala and Justice R Mahadevan highlighted the need to develop such a standard framework in the wake of an instance where the bank-sanctioned loan based on the disputed mortgaged property, later discovered to have title disputes.

The Court opined that a robust title search could have prevented fraudulent transactions by verifying ownership, ensuring no adverse claims existed, and confirming the property's clear legal status.

Case Title: CENTRAL BANK OF INDIA & ANR. VERSUS SMT. PRABHA JAIN & ORS. 

Citation : 2025 LiveLaw (SC) 96
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