Borrowers Who Settled Their Loan Account Will Get Rs 5,000 Each Day If Your Lenders Delay This...

The Reserve Bank of India (RBI) on Wednesday addressed the issues related to practices conducted by lenders like banks, NBFC, and other financial institutions related to releasing all movable/immovable property documents upon receiving full repayment and closure of loan accounts. RBI has now said that if lenders do not release these documents within 30 days after the closure of a loan account, then these lenders will be compensating borrowers at the rate of Rs 5,000 for each day of delay.

The fresh guidelines will come into effect from December 1, 2023.

As per RBI's guidelines, under the 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, RBI observed that the REs follow divergent practices in the release of such movable/immovable property documents leading to customer grievances and disputes.

Hence, RBI decided to issue fresh guidelines regards to release of movable or immovable property documents.

"The REs shall release all the original movable/immovable property documents and remove charges registered with any registry within 30 days after full repayment/ settlement of the loan account," RBI directed in the fresh guidelines dated September 13.

Further, it said, 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.

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.

According to RBI's notification, in case of delay in releasing original movable/immovable property documents or failure to file charge satisfaction form with the relevant registry beyond 30 days after full repayment/ settlement of the loan, the RE shall communicate to the borrower the reasons for such delay. In the 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.

If there is a 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 of Rs 5,000. 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).

RBI said, "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."

To address the contingent event of the demise of the sole borrower or joint borrowers, RBI asked lenders to 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.