Banks to pay Rs 5,000 a day for delay in returning property documents: RBI

RBI's new measures will be applicable to all cases where the release of original movable or immovable property documents falls due on or after December 1, 2023.

Acting on feedback from borrowers about the harassment faced at the hands of some banks and lending firms while getting their property documents back after paying off loans, the Reserve Bank of India has stepped in.

The central bank issued a directive to banks on September 13, asking them to release all movable or immovable property documents upon receiving full repayment and closure of the loan account.

“RBI guidelines emphasising the prompt release of property documents post-loan settlement will help safeguard genuine borrowers' interests,” said Dev Ashish, an investment advisor and founder of StableInvestor. He said borrowers repay loans on time but face unjustified delays from the lenders in the post-loan-closure phase.

The RBI’s directive applies to all commercial banks including small finance banks and regional rural banks, all primary (urban) cooperative banks, all state cooperative banks and district central cooperative banks, all NBFCs and all asset reconstruction companies.

These measures are applicable to all cases where the release of original property documents falls due on or after December 1, 2023. This is expected to end the arbitrary procedures that various lenders are said to follow when it comes to returning property documents against loans.

What type of loans does RBI mean to cover under these measures?

"RBI will include consumer durable loans, education loans, secured loans for immovable assets, such as home loans, vehicle loans, etc., as well as secured personal loans," said Adhil Shetty, CEO, BankBazaar.com.

I have repaid my loan. When will the lending bank release the original property documents?

The lenders must release all the original property documents and remove charges registered with any registry within 30 days of making the full repayment or settlement of the loan account.

“Loan closure is one area most borrowers miss paying much attention to. This notification from the RBI brings it back into focus, and pushes lenders to provide borrower with all documents within the stipulated time,” said Parijat Garg, a digital lending consultant.

This will be effective for all cases where the return of property documents falls due on or after December 1.

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From where I can collect the property documents after repaying the loan?

You can collect the original property documents either from the bank branch that serviced the loan account or any other office of the lender where the documents are available, as per your preference.

The bank will mention the timeline and place of return of the documents in the loan sanction letters on or after the effective date of these measures.

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What is the procedure for acquiring property documents by legal heirs in case of the demise of the sole borrower or joint borrowers?

The lenders have a laid-out procedure for the return of property documents to the legal heirs. The banks will display the procedure on the website along with other similar policies and procedures for customer information.

What is the compensation for delay in release of property documents?

If the return of the original property documents is delayed beyond 30 days of the full repayment or settlement of a loan, the lender must inform the borrower about the reasons for the delay. Where the delay is attributable to the lender, it shall compensate the borrower at the rate of Rs 5,000 for each day of delay.

“The clear penalty structure will ensure lenders are accountable for such issues,” said Ashish.

He said it’s important that this guideline is disseminated to borrowers because only then will they know that lenders can be held accountable for delays.

What happens if the original documents are misplaced or damaged?

In case the original property documents are lost or damaged, either in part or in full, the lenders will help borrowers in obtaining duplicate copies and bear the associated costs, in addition to compensation of Rs 5,000 for each day of delay.

However, in such cases, additional time of 30 days will be given to complete this procedure and the delayed period penalty will be calculated thereafter – after 60 days.