RBI Directs Banks and NBFCs to Release Loan Documents Promptly

The Reserve Bank of India (RBI) has introduced new guidelines compelling banks and non-banking finance companies (NBFCs), collectively referred to as Regulated Entities (Res), to swiftly release original movable and immovable property documents to borrowers within 30 days of full repayment or settlement of their loan accounts. This directive aims to streamline practices that have often led to customer grievances and disputes in the past.

Swift Document Release

As part of these fresh directives, borrowers will now have the option to collect their original movable and immovable property documents from either the branch where the loan account was managed or any other office of the RE where the documents are available. This flexibility is designed to make the process more convenient for borrowers.

Addressing Divergent Practices

The RBI’s decision to issue these directives stems from observed disparities in how Res handle the release of movable and immovable property documents. To create a more consistent and customer-friendly lending environment, these guidelines have been put in place, as per the Fair Practices Code introduced for Res back in 2003.

Timely Communication

In the event of a delay in releasing the original documents or failing to file the charge satisfaction form with the relevant registry beyond 30 days following full repayment or settlement of the loan, the RE will be required to inform the borrower of the reasons for the delay. Importantly, if the delay is due to actions on the part of the RE, they will need to compensate the borrower at a rate of ₹5,000 for each day of the delay.

Loss or Damage to Documents

Additionally, in cases of loss or damage to the original movable or immovable property documents, whether in part or in full, the Res are obligated to assist the borrower in obtaining duplicate or certified copies of the documents. The Res will also cover the associated costs and provide compensation of ₹5,000 per day. However, in such scenarios, the Res will have an additional 30-day period to complete the procedure before the delayed period penalty is calculated.

Transparent Procedures

To ensure transparency and accessibility for borrowers, the RBI mandates that Res display their procedures for the return of original movable and immovable property documents to legal heirs on their websites, along with other relevant policies and procedures for customer information.

These directives are designed not only to streamline the process of returning property documents but also to promote responsible lending practices among Res and enhance the overall borrower experience. Borrowers now have a clear path to follow when seeking the release of their property documents, backed by regulations that aim to protect their rights and interests

By: Sunil Kumar, Attingal