Executive Summary:
This RBI circular, effective December 1, 2023, addresses inconsistencies in the release of property documents after loan settlement, leading to customer grievances. It mandates regulated entities (REs) to release original property documents within 30 days of full repayment and establishes compensation for delays or loss of documents. The directive aims to promote responsible lending conduct and protect borrowers' rights.
Key Points / Main Content:
Release of Property Documents:
* REs must release original movable/immovable property documents and remove registered charges within 30 days of full loan repayment/settlement.
* Borrowers can choose to collect documents from the servicing branch or another RE office where the documents are available.
* Loan sanction letters issued after the effective date must specify the timeline and place for returning original property documents.
* REs must have a clear procedure, displayed on their website, for returning documents to legal heirs in case of the borrower's demise.
Compensation for Delay/Loss:
* If REs delay releasing documents or filing charge satisfaction beyond 30 days, they must communicate the reasons to the borrower.
* If the delay is attributable to the RE, compensation is ₹5,000 per day of delay.
* In case of loss/damage to documents, REs must assist in obtaining duplicates and bear the costs, in addition to delay compensation. REs get an additional 30 days to complete the procedure, and the delayed period penalty will be calculated thereafter, i.e., after a total period of 60 days.
* The compensation does not prejudice the borrower's right to seek other compensation under applicable laws.
Applicability:
* These directions apply to all cases where the release of original movable/immovable property documents is due on or after December 1, 2023.
Impact Analysis:
Commercial Banks, Small Finance Banks, Regional Rural Banks, Local Area Banks, Primary Urban Cooperative Banks, State Cooperative Banks, District Central Cooperative Banks, NBFCs, HFCs, and Asset Reconstruction Companies:
* Impact: These regulated entities must comply with the new guidelines for releasing property documents and implement procedures for compensation in case of delays or loss.
* Action Required: Update internal policies and procedures, train staff, and ensure systems are in place to meet the 30-day deadline for releasing documents and to handle compensation claims. Update loan sanction letters to include the timeline and place for returning property documents.
Borrowers:
* Impact: Borrowers will benefit from a standardized and faster process for receiving their property documents after loan repayment, along with compensation for delays caused by the RE.
* Action Required: Be aware of the new regulations and their rights regarding the release of property documents. Choose the preferred location for document retrieval.
Legal Heirs:
* Impact: They will benefit from a well-laid-out procedure for the return of original movable/immovable property documents in the event of the demise of the sole borrower or joint borrowers.
* Action Required: Understand the process for claiming documents from the RE in the event of the borrower's death, as outlined on the RE's website.
Key Entities Referenced
Commercial Banks: Includes Small Finance Banks and Regional Rural Banks, excluding Payments Banks
Local Area Banks: All Local Area Banks
Primary Urban Cooperative Banks: All Primary Urban Cooperative Banks
State Cooperative Banks: All State Cooperative Banks and District Central Cooperative Banks
NBFCs: All Non-Banking Financial Companies including HFCs
Asset Reconstruction Companies: All Asset Reconstruction Companies
Banking Regulation Act, 1949: The Act under which the directions are issued, specifically sections 21, 35A and 56
Reserve Bank of India Act, 1934: The Act under which the directions are issued, specifically sections 45JA and 45L
RBI/2023-24/60
DoR.MCS.REC.38/01.01.001/2023-24 September 13, 2023
All Commercial Banks (including Small Finance Banks
and Regional Rural Banks, excluding Payments Banks)
All Local Area Banks
All Primary (Urban) Co-operative Banks
All State Co-operative Banks and District Central Co-operative Banks
All NBFCs (including HFCs)
All Asset Reconstruction Companies
Madam / Dear Sir,
Responsible Lending Conduct – Release of Movable / Immovable Property
Documents on Repayment/ Settlement of Personal1 Loans
In terms of the guidelines on Fair Practices Code issued to various Regulated Entities
(REs) since 2003, REs 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. To address
the issues faced by the borrowers and towards promoting responsible lending conduct
among the REs, the following Directions are being issued:
Release of Movable / Immovable Property Documents
2. The REs shall 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.
3. 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.
1 As defined in Annex to the Circular on ‘XBRL Returns – Harmonization of Banking Statistics’ dated January
04, 2018
विवियमि विभाग, केंद्रीय कायाालय, 12िी ींऔर 13िी ींमींव़िल, केंद्रीय कायाालय भिि, शहीद भगत व ींह मागा, म ींबई 400001
टेलीफोि /Tel No: 22601000 फैक्स/ Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692
Department of Regulation, Central Office, 12th & 13th Floor, Central Office Building, Shaheed Bhagat Singh Marg, Mumbai – 400001
Tel No: 22601000 Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692
बैंक वहींदी में पत्राचार का स्वागत करता है
Caution: RBI never sends mails, SMSs or makes calls asking for personal information like bank account details, passwords, etc. It never keeps or
offers funds to anyone. Please do not respond in any manner to such offers.4. 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.
5. In order to address the contingent event of demise of the sole borrower or joint
borrowers, the REs shall 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.
Compensation for delay in release of Movable / Immovable Property Documents
6. 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 shall 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.
7. In case 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 indicated at paragraph 6 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).
8. 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.
Applicability
9. These Directions shall be applicable to all cases where release of original movable /
immovable property documents falls due on or after December 1, 2023.
10. The above Directions 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.
Yours faithfully,
(Santosh Kumar Panigrahy)
Chief General Manager
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