Reserve Bank of India (RBI) Instructs Banks to Release Loan Documents Promptly, Offering Compensation
The Reserve Bank of India (RBI) has issued a directive to banks and financial institutions, urging them to promptly release all original movable or immovable property documents and remove charges registered with any registry within 30 days after borrowers fully repay their loans.
In a bid to address customer grievances and disputes arising from divergent practices, the RBI has mandated that Regulated Entities (REs) compensate borrowers at a rate of Rs 5,000 per day for any delay in complying with the directive.
To ensure uniformity and fairness, the RBI has called on REs to release all original movable or immovable property documents and clear charges registered with any registry within 30 days after borrowers settle their loan accounts. In case of delays, the REs must provide the borrower with clear reasons for the delay.
Furthermore, the RBI has granted borrowers the option to collect their original movable or immovable property documents from the banking outlet or branch where the loan account was serviced, or from any other office of the RE where the documents are available, based on their preference. The loan sanction letters issued after the effective date will state the timeline and place for the return of these documents.
Acknowledging the possibility of the borrower’s demise, the RBI has emphasized that REs must establish a well-defined procedure for returning original movable or immovable property documents to the legal heirs. REs are required to display this procedure, along with other relevant policies and customer information, on their websites.
In cases of loss or damage to the original documents, the notification states that REs must assist borrowers in obtaining duplicate or certified copies and bear the associated costs, while also providing compensation. However, in such instances, REs have an additional 30 days to complete the procedure, and the penalty for the delay will be calculated after this total period of 60 days.
The compensation outlined in these directions does not prejudice the rights of borrowers to seek additional compensation under applicable laws.
These RBI directives will apply to all cases where the release of original movable or immovable property documents is due on or after December 1, 2023. By implementing these measures, the RBI aims to ensure transparency, efficiency, and fair practices within the banking sector, safeguarding the interests of borrowers and reducing customer grievances.
