RBI Directs Banks and NBFCs to Release Property Documents Swiftly Upon Loan Repayment

Introduction:

The Reserve Bank of India (RBI) has recently issued crucial directives to banks and non-banking finance companies (NBFCs) regarding the prompt release of original movable and immovable property documents upon full repayment of loans. This move is aimed at enhancing customer satisfaction, promoting responsible lending practices, and streamlining the release process, ultimately benefiting borrowers.

1. Background: The RBI’s new guidelines stem from the Fair Practices Code issued to regulated entities (REs) since 2003, emphasizing the importance of releasing property documents post-repayment. The RBI acknowledges the inconsistent practices followed by REs, leading to customer grievances and disputes.
2. Key Directives: a. 30-Day Release Period: REs are mandated to release all original movable and immovable property documents and remove any registered charges within 30 days after full repayment or settlement of the loan account.b. Borrower’s Choice: Borrowers can choose to collect their property documents either from the branch where the loan was serviced or from any other RE office where the documents are available.c. Transparency: The timeline and location for document return will be explicitly mentioned in the loan sanction letters issued on or after the effective date.d. Handling Deceased Borrowers: REs must establish a clear procedure for returning property documents to the legal heirs in the unfortunate event of the borrower’s demise. This procedure should be prominently displayed on the REs’ websites.
3. Penalties for Delays: a. Communication of Delays: In cases of delays in releasing property documents or failing to file charge satisfaction forms with the relevant registry beyond 30 days post-repayment, the REs must inform the borrower of the reasons for the delay.b. Compensation for Delay: If the delay is attributable to the RE, they must compensate the borrower at a rate of ₹5,000 for each day of delay.c. Loss or Damage: In the event of loss or damage to property documents, whether partial or complete, the REs are responsible for assisting the borrower in obtaining duplicate or certified copies. Additionally, they must bear the associated costs and pay compensation at the rate of ₹5,000 per day. However, the REs are granted an additional 30 days to complete this process, with delayed period penalties calculated thereafter (after a total period of 60 days).
4. Effective Date: a. These directives will be applicable to all cases where the release of original movable and immovable property documents is due on or after December 1, 2023.

Conclusion:

FAQs –

1. What is the RBI’s recent directive regarding the release of property documents by banks and NBFCs?

2. When do these directives come into effect?

These directives will be applicable to all cases where the release of original movable and immovable property documents is due on or after December 1, 2023.

3. Can borrowers choose where to collect their property documents?

Yes, borrowers have the option to collect their original property documents either from the branch where the loan was serviced or from any other office of the regulated entity (RE) where the documents are available, according to their preference.

4. What happens if there is a delay in releasing property documents?

In cases where there is a delay in releasing property documents or failing to file charge satisfaction forms with the relevant registry beyond 30 days after full repayment or settlement of the loan, the RE must communicate the reasons for the delay to the borrower. If the delay is attributable to the RE, they must compensate the borrower at a rate of ₹5,000 for each day of delay.

5. What if property documents are lost or damaged?

In the event of loss or damage to original movable or immovable property documents, whether partial or complete, the RE is responsible for assisting the borrower in obtaining duplicate or certified copies. The RE must also bear the associated costs and pay compensation at the rate of ₹5,000 per day. However, an additional 30 days are granted to the RE to complete this process, with delayed period penalties calculated thereafter (after a total period of 60 days).

6. How can borrowers find information about the procedure for returning property documents to legal heirs in case of the borrower’s demise?

The procedure for returning property documents to legal heirs in the event of the borrower’s demise should be displayed on the website of the regulated entity (RE), along with other similar policies and procedures for customer information.

7. What is the purpose of these directives from the RBI?

These directives are aimed at addressing customer grievances and disputes related to the release of property documents and promoting responsible lending conduct among banks and NBFCs. They are intended to enhance transparency, efficiency, and customer satisfaction in the lending process.

8. Are these directives applicable to all types of loans?

These directives apply to all loans, regardless of the type, where the release of original movable and immovable property documents is due on or after December 1, 2023.

9. Where can borrowers get more information about these directives and their rights?

Borrowers can refer to the official website of the RBI and the respective websites of the banks and NBFCs for detailed information about these directives, loan procedures, and borrower rights.

10. What should borrowers do if they believe their rights under these directives have been violated?

Borrowers who believe their rights under these directives have been violated should contact the respective bank or NBFC in the first instance to seek resolution. If the issue remains unresolved, they can consider filing a complaint with the RBI or seeking legal advice.

Please note that this informational purposes and should not be considered legal advice. Borrowers should consult with their respective lenders and legal professionals for specific concerns or issues related to their loans and property documents.