In the event of non-compliance with this directive, Regulated Entities (REs) will be required to compensate the borrower at a rate of ₹ 5,000 for each day of delay, as per a notification issued by the RBI.
The Reserve Bank issued a directive on Wednesday, instructing banks and financial institutions to promptly return all original property documents, whether movable or immovable, and to clear any charges registered with any registry within 30 days following the full repayment of a loan by the borrower.
Failure to adhere to this directive will result in Regulated Entities (REs) having to provide compensation to the borrower at a daily rate of ₹ 5,000, as specified in an RBI notification.
The RBI observed that Regulated Entities (REs) have been adopting varying practices when it comes to releasing movable or immovable property documents, resulting in customer grievances and disputes.
In order to standardize these procedures and ensure fairness, the RBI has instructed REs to release all original movable and immovable property documents and to clear any charges registered with any registry within 30 days following the full repayment or settlement of the loan account. If any delays occur in this process, the RE is required to communicate the reasons for the delay to the borrower.
Furthermore, borrowers are to be given the choice of collecting the original movable or immovable property documents either from the branch where the loan account was serviced or from any other office of the RE where the documents are available, based on their preference.
The RBI specified that the loan sanction letters issued on or after the effective date will include details about when and where the original movable or immovable property documents should be returned.
To account for the unfortunate situation of the borrower's demise, whether it's a sole borrower or joint borrowers, the RBI has mandated that Regulated Entities (REs) establish a well-defined procedure for returning the original movable or immovable property documents to the legal heirs. This procedure will be made accessible on the REs' websites, along with other similar policies and customer-related procedures.
In the event of loss or damage to the original movable or immovable property documents, the notification clarified that REs are responsible for assisting the borrower in obtaining duplicate or certified copies of these documents and will cover the associated costs, in addition to providing compensation.
Nonetheless, in such situations, Regulated Entities (REs) will have an additional 30-day window to finalize this process, and the penalty for the delay will be calculated afterward, following a total period of 60 days.
The compensation outlined in these directives will not affect the borrower's entitlement to any other compensation as per relevant laws, the RBI emphasized.
These instructions will be applicable to all cases where the release of original movable or immovable property documents is scheduled on or after December 1, 2023, as stated by the RBI.
