Timely return of documents by banks

In today’s age, it is quite easy to construct a house or buy a flat by taking a home loan. Be it a bank or a non-financial bank, one has to submit papers of the property as collateral in lieu of loan. Many times, people mortgage movable or immovable property. It has also been observed that after repaying the loan, banks or non-financial banks continuously delay in returning the documents of your property which you had submitted to the bank.  Now, RBI, the Regulator has come out with the following guidelines:

• The Central Bank has said that the time limit and place for returning the documents after repaying the loan given against mortgage of property documents should be mentioned in the loan sanction letter itself.
• Implementation of this instruction of the Reserve Bank of India will start from December 1, 2023.
• Further, the Reserve Bank of India has given this instruction to protect the rights of loan takers and to improve the loan granting process and adds that this guideline has been issued under the Fair Practice Code.
• The customer taking the loan has been given the facility to either go to the nearest branch and collect his documents or as per bank, collect these documents from any center near him.

What are the instructions of RBI?

1. The regulated entities i.e. Bank or NBFC will release all original movable/immovable property documents and remove the charges registered in any registry within a period of 30 days after full repayment/settlement of the loan account.
2. The borrower will be given the option to collect the original movable/immovable property documents as per his preference either from the banking outlet/branch where the loan account was operated or from any other office of the regulated entities where the documents are available.
3. The time limit and place for return of original movable/immovable property documents will be mentioned in the loan section letter to be issued.
4. Regulated entities shall have a well laid down procedure for return of original movable/immovable property documents to the legal heirs in case of accidental death of the sole borrower or joint borrower.
5. Such process will also be displayed on the website of the regulated entities along with other similar policies and procedures for customer information.

Compensation payable for the delay

• If the bank delays return of the original documents till 30 days after full repayment of the loan or fails to file the charge satisfaction form with the concerned registry for more than 30 days after full repayment or settlement of the loan, they should inform the customers about the reasons for such delay.
• In cases where the delay is caused by the bank or NBFC, they will have to compensate the borrowers at the rate of Rs 5,000 per day.
• In case of loss or damage of original movable or immovable property documents, partially or completely, the Bank or NBFC will assist the borrower in obtaining duplicate or certified copies of the documents along with bearing expenses.
• However, in such cases, an additional period of 30 days will be available to the regulated entities to complete the process and the compensation for the delayed period will be calculated thereafter (i.e., after the total period of 60 days).
• The compensation to be paid under these instructions shall not affect the rights of the borrower to receive any other compensation in accordance with any applicable law.

Date from which this comes to effect

• These instructions will be applicable to all cases where the original movable or immovable property documents are to be released on or after December 1, 2023.

These instructions have been issued under Sections 21, 35A and 56 of the Banking Regulation Act, 1949, Sections 45JA and 45L of the Reserve Bank of India Act, 1934 and Section 30A of the National Housing Bank Act, 1987.