The Reserve Bank has issued a directive to banks and financial institutions requiring them to release all original property documents both movable and immovable within 30 days of a borrower fully repaying their loan. Failure to comply with this directive will result in regulated entities compensating the borrower at a rate of ₹5,000 per day of delay as per a notification from the RBI.
The RBI’s decision stems from the observation that regulated entities have been following inconsistent practices when it comes to releasing such property document, causing customer grievances and disputes. The details regarding when and where these property documents will be returned will now be clearly specified in loan sanction letters issued on or after the effective date of this directive.
To address situations where the borrower passes away, the RBI mandates that regulated entities establish a well defined procedure for returning property documents to the legal heirs. These procedures will be made publicly available on the websites of these entities, alongside other relevant policies and procedures for customer information.
In cases where the original property documents are lost or damaged, regulated entities will be responsible for assisting the borrower in obtaining duplicate or certified copies, covering the associated costs and paying compensation. However, this process allows an additional 30 day period for regulated entities to complete the procedure, with penalties calculated thereafter totaling 60 days.
It’s important to note that the compensation provided under these directions doesn’t prejudice a borrower’s rights to seek additional compensation under any applicable laws, as emphasized by the RBI.
The RBI has clarified that these directives will apply to all instances where the release of original movable or immovable property documents is required on or after December 1st 2023.