The RBI has been looking to tighten the lending norms for the real estate sector after last year’s bribery-for-loan scam involving LIC Housing Finance and some public sector banks. RBI also asked the banks to set up an escrow mechanism at the time of providing project loans to real estate companies. An escrow account will help in safeguarding the interests of the lender from repayment risk and in monitoring the end use of funds. An escrow account is a trust account in the borrower’s name.
