Now the lending institutes will have to release the property documents upon receiving full repayment and closure of loan account within thirty days, otherwise they will have to compensate the borrower at the rate of ₹5,000/- for each day of delay. RBI, in its letter dated September 13, 2023, has directed all Commercial Banks (including Small Finance Banks and Regional Rural Banks, excluding Payments Banks), all Local Area Banks, All Primary (Urban) Co-operative Banks, all State Co-operative Banks and District Central Co-operative Banks, all NBFCs (including HFCs) and all Asset Reconstruction Companies to adhere to these guidelines or face the consequences.
These Directions have been issued under sections 21, 35A and 56 of the Banking Regulation Act, 1949, sections 45JA and 45L of the Reserve Bank of India Act, 1934, and section 30A of the National Housing Bank Act, 1987.
RBI letter states that in terms of the guidelines on Fair Practices Code issued to various Regulated Entities (REs) since 2003, REs are required to release all movable / immovable property documents upon receiving full repayment and closure of loan account. However, it has been observed that the REs follow divergent practices in release of such movable / immovable property documents leading to customer grievances and disputes. To address the issues faced by the borrowers and towards promoting responsible lending conduct among the REs, these Directions are being issued.
RBI directs that the REs shall release all the original movable / immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment/ settlement of the loan account.
The borrower shall be given the option of collecting the original movable / immovable property documents either from the banking outlet / branch where the loan account was serviced or any other office of the RE where the documents are available, as per her / his preference.
The timeline and place of return of original movable / immovable property documents will be mentioned in the loan sanction letters issued on or after the effective date.
RBI directions further adds that in order to address the contingent event of demise of the sole borrower or joint borrowers, the REs shall have a well laid out procedure for return of original movable / immovable property documents to the legal heirs. Such procedure shall be displayed on the website of the REs along with other similar policies and procedures for customer information.
Tightening the noose, the RBI warns that in case of delay in releasing of original movable / immovable property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after full repayment/ settlement of loan, the RE shall communicate to the borrower reasons for such delay. In case where the delay is attributable to the RE, it shall compensate the borrower at the rate of ₹5,000/- for each day of delay.
In case of loss/damage to original movable / immovable property documents, either in part or in full, the REs shall assist the borrower in obtaining duplicate/certified copies of the movable / immovable property documents and shall bear the associated costs, in addition to paying the compensation as indicated above. However, in such cases, an additional time of 30 days will be available to the REs to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days).
The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.
These Directions shall be applicable to all cases where release of original movable / immovable property documents falls due on or after December 1, 2023.
Jag Mohan Thaken is a Haryana based retired Senior Bank Manager, views are personal
