The Reserve Bank of India on Wednesday directed banks to release all the original documents of movable or immovable property within 30 days after full repayment or settlement of the loan. The RBI also asked the lenders to remove charges registered with any registry during the period.
In a circular, the RBI said, “In case of delay in releasing of original property documents or failing to file charge satisfaction form with the relevant registry beyond 30 days after full repayment/ settlement of loan, the RE (regulated entity) shall communicate to the borrower reasons for such delay.”
In case where the delay is attributable to the RE (the lender), it shall compensate the borrower at the rate of Rs 5,000 for each day of delay, the RBI said.
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 compensation.
“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 RBI said.
The banking regulator issued the directions after it observed that the REs (regulated entities) follow divergent practices in the release of such movable/ immovable property documents leading to customer grievances and disputes.
It directed the lenders to “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 RBI also told the lenders that 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,” the RBI notification said.
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.
“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,” the RBI said.
RERA expert Venkat Rao, founder of Intygrat Law, said, “This definitely is a big relief for borrowers, banks/ NBFCs are not as swift at releasing and handing over the security documents after the full closure of loans as compared to the time of lending. In fact, it becomes a tedious and frustrating process for a borrower to have the documents released from banks/ NBFCs post full payment of the loan and in fact leads to unnecessary litigations.”
He said that after a loan is paid in full and closed at times by the time documents are released, certain financial institutions come with some miscellaneous charges, and borrowers are at the mercy of these banks/ NBFCs to get their property documents released. “This penalty will certainly put a lot of pressure and will certainly improve the situation.”
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