September 14, 2023: The Reserve Bank of India (RBI) on September 13 issued a notification, saying banks must return property documents to a borrower and remove charges registered with any registry in 30 days after full settlement of a loan account. The apex bank has also provided for a penalty of Rs 5,000 per day if a bank fails to return property documents to the borrower within the prescribed timeline.
The apex bank has also issued several other directives with the aim to end the hardships of borrowers, especially home loan borrowers. The new guideline comes into effect from December 1, 2023.
“It has been observed that the regulated entities (Res) follow divergent practices in the release of such movable/immovable property documents, leading to customer grievances and disputes,” the RBI said, adding that the directives are meant to address the issues faced by borrowers, and towards promoting responsible lending conduct among financial institutions.
As a standard practice, banks in India keep the original property documents at the time of sanctioning the loan. The borrower only gets to keep duplicate copies of the document. These documents are returned only after the loan is fully repaid. These documents are sent to the bank’s central repository, mostly run by a third party. Since central repositories are mostly run by third parties, their location may change during the housing loan tenure. Consequently, a great number of cases have come to light where banks have conceded to either misplacing the document or losing it.
See also: What if your bank loses your sale deed?
Rs 5,000 compensation for delay in release of property documents by banks
In case of a delay in the release of original movable/immovable property documents by the bank 30 days after the loan is fully repaid, the bank will compensate the borrower with Rs 5,000 for each day of delay. The same penalty will have to be paid if the bank fails to file a charge satisfaction form with the relevant registry beyond 30 days after full repayment/settlement of the loan. The bank will also have to communicate to the borrower the reasons for such delays. However, the bank will pay this penalty in cases where the delay is attributable to the bank and not the borrower.
Penalty for loss of property documents by the bank
If the bank loses your original movable/immovable property documents, it will help you get duplicate/certified copies. In addition to paying Rs 5,000 for each day of delay in this case as well, the bank will also bear the associated costs. However, the bank will get an additional 30 days to complete this procedure. This means that the delayed period penalty will be calculated after 60 days.
In these guidelines 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, the RBI has also clarified that “the compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law”.
Borrower can collect property paper from any branch
The borrower will be given the option to collect the property documents either from the branch where the loan account was serviced or any other office of the bank where the documents are available.
Loan sanction letters to mention the timeline and place of return of original property documents
Loan sanction letters issued on or after December 1, 2023, will have to mention the timeline and place of return of the original property documents.
Banks to lay out procedure for property document return in case of demise of borrowers
The RBI has also mandated banks to “have a well laid-out procedure for the return of original movable/immovable property documents to the legal heirs in the event of the demise of the sole borrower or joint borrowers”. Banks will have to display this procedure on their websites, along with other similar policies and procedures for customer information.
What are regulated entities?
Regulated entities include all commercial banks (including small finance banks and regional rural banks, all local area banks, all primary (urban) co-operative banks, all state co-operative banks & district central co-operative banks, all non-banking finance companies including housing finance companies and all asset reconstruction companies. Payments banks are not regulated entities.
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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