RBI introduces guidelines for timely release of property papers to borrowers after loan repayment

The Reserve Bank of India (RBI) recently issued guidelines for the timely release of property documents after the loan is paid off. This is aimed at helping borrowers recover their property documents faster.

It has been observed that Regulated Entities (REs), which include banks and non-banking finance companies (NBFCs), National Housing Bank (NHB),  etc., that are regulated by the Reserve Bank of India and follow the guidelines set by the central bank, have varied practices in releasing secured property documents post-loan settlement, often leading to customer grievances and disputes.

“According to the new guideline, the original documents for a movable or unmovable property must be released within 30 days of full repayment of the loan taken for said property. In case of a delay, a compensation of Rs 5,000 per day will be applicable for each day of delay in releasing the property documents. If the original property documents are lost or damaged, the regulated entities must assist the borrower to obtain duplicate/certified copies of the property in question within a period of 30 days. This move could help ensure that regulated entities abide by the set rules and provide borrowers a greater scope of recourse with regard to property-related issues,” said Adhil Shetty, CEO of Bankbazaar.com.

Furthermore, in scenarios where original property documents are lost or damaged, REs are mandated to offer necessary assistance to borrowers in procuring duplicate or certified copies within a span of 30 days. The REs are required to bear the associated cost. This directive could be a significant stride towards ensuring compliance with regulations by lending institutions and providing borrowers with a larger remedy scope in case of property document-related issues.

In the case of a total or partial loss or damage to original movable or immovable property documents, an additional grace period of 30 days will be granted to REs before the delayed period penalty comes into effect, i.e., after 60 days.

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These directions are designed to supplement a borrower's rights to claim any other compensation as per applicable law. These guidelines shall be enforced in all cases where the release of original movable or immovable property documents is due on or after December 1, 2023.

According to the borrower’s preference, REs are also asked to offer borrowers an option to collect their original property documents from either the branch where the loan account was managed or any other office where the documents may be available.

Mention of the timeline and place of return of original property documents will henceforth be included in the loan sanction letters issued after the effective date.

Addressing the possible circumstance of the demise of the borrower(s), REs should have a detailed procedure to return the original property documents to the legal heirs. These procedures should be sufficiently publicized on REs' official websites, alongside other essential customer information policies and procedures.

These new guidelines underline RBI's proactive approach towards making lending processes more borrower-centric, hassle-free, and transparent, thereby helping foster a more customer-friendly banking atmosphere.