Responsible Lending Conduct: Guidelines for Release of Movable/Immovable Property Documents
In line with the Fair Practices Code, Regulated Entities (REs) have been mandated since 2003 to release all movable and immovable property documents upon full repayment and closure of a loan account. However, varying practices among REs have led to customer grievances and disputes. To address these issues and promote responsible lending conduct, the following directions have been issued:
Release of Movable/Immovable Property Documents
REs are required to release all original movable and immovable property documents and remove charges registered with any registry within 30 days after full repayment or settlement of the loan account. Borrowers should have the option to collect their original property documents from either the banking outlet or branch where the loan was serviced or any other office of the RE where the documents are available, according to their preference. The timeline and location for returning original property documents will be specified in loan sanction letters issued on or after the effective date of these directions.
In the event of the demise of the sole borrower or joint borrowers, REs must have a well-defined procedure for returning original property documents to the legal heirs. This procedure should be displayed on the REs’ websites alongside other relevant policies and procedures for customer information.
Compensation for Delay in Release of Property Documents
If there is a delay in releasing the original property documents or in filing the charge satisfaction form with the relevant registry beyond 30 days after full repayment or settlement of the loan, the RE must communicate the reasons for the delay to the borrower. If the delay is attributable to the RE, they must compensate the borrower at a rate of ₹5,000 for each day of delay.
In cases of loss or damage to the original property documents, whether in part or in full, the REs are required to assist the borrower in obtaining duplicate or certified copies of the documents and bear the associated costs. Additionally, they must pay compensation as specified for delays. An additional 30 days is granted to REs to complete this procedure, after which the delayed period penalty will be calculated (i.e., after a total period of 60 days).
The compensation provided under these directions is without prejudice to the borrower’s right to seek any other compensation as per applicable law.
Applicability
These directions apply to all cases where the release of original property documents falls due on or after December 1, 2023. They are 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.
By ensuring a standardized process for the release of property documents and providing clear guidelines for compensation in case of delays or loss, these directions aim to enhance customer satisfaction and trust in the lending process.
Access the full RBI circular here
