RBI asks banks, NBFCs to release original movable, unmovable property documents within 30 days of full repayment of loan

As per the latest RBI’s directive, the borrower will be given the option of collecting the original movable / immovable property documents either from the branch where the loan account was serviced or from any other office of the RE where the documents are available.

The Reserve Bank of India (RBI) has issued directions to Regulated Entities (REs) such as banks and non-banking finance companies (NBFCs) to release all the original movable / immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment/ settlement of the loan account.

This instruction has come as per the guidelines on Fair Practices Code issued to various REs since 2003, who are required to release all movable / immovable property documents upon receiving full repayment and closure of loan account. 

“However, it has been observed that the REs follow divergent practices in release of such movable / immovable property documents leading to customer grievances and disputes,” the RBI said in the circular issued on Wednesday.

To address the issues faced by the borrowers and towards promoting responsible lending conduct among the REs, the directions have been issued, the circular said. 

As per the directive the borrower will be given the option of collecting the original movable / immovable property documents either from the banking outlet / branch where the loan account was serviced or any from other office of the RE where the documents are available, as per her / his preference.

“The timeline and place of return of original movable / immovable property documents will be mentioned in the loan sanction letters issued on or after the effective date,” the circular said. 

To address the contingent event of demise of the sole borrower or joint borrowers, the REs must have a well laid out procedure for return of original movable / immovable property documents to the legal heirs.

“Such procedure shall be displayed on the website of the REs along with other similar policies and procedures for customer information,” the circular said. 

In case of delay in releasing of original movable / immovable property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after full repayment/ settlement of loan, the RE will have to communicate to the borrower reasons for such delay.

“In case where the delay is attributable to the RE, it shall compensate the borrower at the rate of ₹5,000 for each day of delay,” the circular said. 

In case of loss/damage to original movable / immovable property documents, either in part or in full, the REs will have to assist the borrower in obtaining duplicate/certified copies of the movable / immovable property documents and will bear the associated costs, in addition to paying compensation of ₹5,000 per day. 

“However, in such cases, an additional time of 30 days will be available to the REs to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days),” the circular added.

compensation as per any applicable law,” the circular further said.

Giving advance time to the REs to act the RBI said these directions would be applicable to all cases where release of original movable / immovable property documents falls due on or after December 1, 2023.