RBI to banks: Give property papers back within 30 days of loan closure

Personal loans refer to loans given to individuals and include consumer credit, education loan, loans given for creation or enhancement of immovable assets (such as housing), and loans given for investment in financial assets like shares and debentures. The new directives will be applicable to all these loan categories.

“The REs (regulated entities) shall release all the original movable or immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment or settlement of the loan account,” the RBI said.

“In case where the delay is attributable to the RE, it shall compensate the borrower at the rate of Rs 5,000 for each day of delay,” it said, adding that the lender will have to communicate to the borrower the reasons for such delay.

In the event of loss of, or damage to, original property documents, either in part or in full, the lender will have to assist the borrower in obtaining duplicate or certified copies of the documents and will have to bear the associated costs. This cost will be in addition to the daily compensation of Rs 5,000 for each day of delay, the RBI said.

However, in such cases, an additional time of 30 days will be available to the lender to complete this procedure, and the penalty for delay will be calculated thereafter, that is, after a total period of 60 days.

The RBI said a borrower will be given the option of collecting the original property documents either from the banking outlet or branch where the loan account was serviced or any other office of the regulated entities where the documents are available, as per their preference.

The lender will have to mention the timeline and place of return of original property documents in the loan sanction letters issued on or after December 1 this year.

In order to address the contingent event of death of the sole borrower or joint borrowers, the RBI said that lenders will need to lay out a procedure for return of original property documents to the legal heirs. They will have to display this procedure on their website, along with other similar policies and procedures for customer information, the RBI said.

The new directives have been issued after the RBI observed that the regulated entities, which are required to release all movable or immovable property documents upon receiving full repayment and closure of personal loan account, were following divergent practices, leading to customer grievances and disputes.