RBI on Wednesday directed all the regulated entities such as Commercial Banks, cooperative banks, small banks, RRBs, Local Area Banks, NBFCs, Asset Reconstruction Companies, etc. 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.
The Central Bank found that the regulated entities have been found in violation of the guidelines on the Fair Practices Code issued to various Regulated Entities (REs) since 2003. According to the Fair Practices Code, REs are required to release all movable/immovable property documents upon receiving full repayment and closure of the loan account. These entities have often adopted ‘divergent practices in the release of such movable/immovable property documents leading to customer grievances and disputes’, said RBI.
As a solution for the same, the banking regulator issued the following new guidelines for the REs.
According to the notification, the borrower shall 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 other office of the RE where the documents are available, as per her / his preference.
It is obligatory on the part of lenders to mention the timeline and place of return of original movable/immovable property documents in the loan sanction letters issued on or after the effective date.
In case of a contingent event of the demise of the sole borrower or joint borrowers, the REs shall have a well-laid-out procedure for the 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 release said.
On the matter of compensation for the delay in the release of property documents, the new guidelines state that the REs are instructed to communicate the reason for the delay to the borrower. This includes delay in providing documents or failure to file a charge satisfaction form with the relevant registry within the 30-day timeline after the complete settlement of the loan. In the event of a delay attributable to the RE, the entities are required to compensate the borrower at the rate of Rs 5000 for every day of the delay, the release added.
In the event of loss/damage to original movable/immovable property documents, either in part or in full, the REs shall assist the borrower in obtaining duplicate/certified copies of the movable/immovable property documents and shall bear the associated costs, in addition to paying compensation as mentioned above. 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 above directions should be applicable to all cases wherein the release of property documents is due on or after December 1, 2023, said RBI.
“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”, the release said.