The Reserve Bank of India (RBI) has issued a directive that mandates all banks, non-banking finance companies (NBFCs), and asset reconstruction companies (ARCs) to promptly release original movable and immovable property documents and clear any registered charges within 30 days of full repayment or settlement of a loan account. This directive aligns with the central bank’s responsible lending conduct for regulated entities (REs).
Under these guidelines, borrowers will have the flexibility to choose where they collect their original property documents, either from the bank branch where the loan account was serviced or from any other office of the RE that holds the documents, based on their preference. Details regarding the timeline and location for returning these documents will be explicitly mentioned in the loan sanction letters issued on or after the effective date of this directive.
To address situations where the sole borrower or joint borrowers face unfortunate events like death, the REs are required to establish a well-defined procedure for returning original property documents to legal heirs. This procedure must be prominently displayed on the REs’ websites, along with other relevant policies and procedures for customer information.
In the event of any delay in releasing the original property documents or failure to submit the charge satisfaction form to the relevant registry within the stipulated 30-day period after full loan repayment, the REs are obligated to communicate the reasons for the delay to the borrower. If the delay is attributed to the RE, they must compensate the borrower at a rate of ₹5,000 for each day of delay.
In cases where the original property documents are lost or damaged, either partially or entirely, the REs are responsible for assisting the borrower in obtaining duplicate or certified copies of these documents, covering the associated costs. This compensation is in addition to the penalties for delay. However, an extra 30-day period is granted to REs to complete this procedure, and the penalty for the delayed period is calculated thereafter, resulting in a total potential delay of 60 days.
The RBI emphasizes that the compensation provided in accordance with these directions should not undermine a borrower’s rights to seek additional compensation as per applicable laws.
This directive from the RBI is a significant step towards ensuring transparency and responsible lending practices within the banking and NBFC sectors. It aims to protect the interests of borrowers by guaranteeing their access to essential property documents promptly after settling their loan accounts. The provision for compensation in case of delays or losses further incentivizes REs to adhere to these guidelines and prioritize customer satisfaction.
Overall, these directives from the RBI reinforce the importance of responsible lending and customer-centric practices in the financial sector, fostering trust and reliability between borrowers and regulated entities. Borrowers can expect a more streamlined process for accessing their property documents, and in the unfortunate event of loss or damage, they can rely on the support and compensation provided by REs, as mandated by the central bank.
