The Reserve Bank of India (RBI) has issued strict guidelines to ensure the prompt return of property documents following loan repayment. These new regulations enhance customer satisfaction and responsible lending practices among financial institutions.
Prompt Document Release
Under these guidelines, lenders are now required to release property documents within 30 days of the repayment of a personal loan. Failure to comply with this timeframe will result in lenders compensating borrowers at Rs 5,000 per day.
Furthermore, banks and finance companies must ensure that these documents are readily available either at the branch where the loan was serviced or at another office of the lender, as per the borrower's preference. If the original property documents are partially or fully lost or damaged, lenders must assist borrowers in obtaining duplicate or certified copies, covering the associated costs. In cases necessitating document replacement due to loss or damage, lenders have an additional 30 days for completion, with penalty calculations starting after 60 days.
Effective Date and Transition Period
These new regulations will take effect for all cases where document release is due on or after December 1, 2023. This gives banks slightly over two months to adapt their logistics and IT systems to ensure efficient communication and processes for document release.
The RBI's move stems from varying lending practices in releasing movable and immovable property documents, often leading to customer complaints and disputes. To address these issues and encourage responsible lending conduct, the regulator has introduced these standardized rules.
Transparency and Accountability
In the future, lenders must specify in their sanction letters the timing and location for returning the original property documents. Lenders must also establish a clear procedure for returning these documents to legal heirs in the unfortunate event of the borrower's demise. This procedure, along with other relevant policies, must be published on the lender's website.
In case of a delay in releasing property documents or filing charge satisfaction forms with the relevant registry beyond 30 days after full repayment, the lender must inform the borrower of the reasons for the delay. If the delay is attributed to the lender, they must compensate the borrower at a rate of Rs 5,000 per day of delay.
These new RBI guidelines are expected to bring much-needed clarity, accountability, and efficiency to returning property documents, benefiting borrowers and promoting responsible lending practices among regulated entities.