RBI Imposes Rs 5,000 Daily Fine On Banks For Property Document Delays

Responding to complaints from borrowers who have faced harassment from certain banks and lending firms while trying to retrieve their property documents after repaying personal loans, the Reserve Bank of India (RBI) has taken action. On 13 September, the central bank issued a directive to all types of financial institutions, instructing them to promptly release all property documents, whether movable or immovable, upon receiving full repayment and closing of a personal loan account.

Dev Ashish, an investment advisor and founder of Stable Investor, commented on the RBI's guidelines, stating that they would protect the interests of genuine borrowers who often experience unwarranted delays from lenders after repaying their loans.

The RBI's directive applies to a wide range of financial institutions, including commercial banks, small finance banks, regional rural banks, primary (urban) cooperative banks, state cooperative banks, district central cooperative banks, non-banking financial companies (NBFCs), and asset reconstruction companies. These measures are applicable to cases where the release of original property documents is due on or after 1 December 2023, with the aim of ending arbitrary procedures followed by various lenders in returning property documents related to loans.

Regarding the timing of document release, lenders are now obligated to release all original property documents and remove any charges registered with registries within 30 days of full repayment or settlement of the loan account. This requirement applies to cases where the return of property documents falls due on or after 1 December.

Borrowers can collect their original property documents either from the bank branch that serviced the loan account or from another office of the lender where the documents are available, based on their preference. The bank will specify the timeline and location for document return in the loan sanction letters issued on or after the effective date of these measures.

In cases where the sole borrower or joint borrowers have passed away, there is a defined procedure for legal heirs to obtain property documents. Banks are required to display this procedure on their websites, along with other relevant policies and procedures for customer information.

For any delay in the release of property documents beyond 30 days from the full repayment or settlement of a loan, the lender must inform the borrower of the reasons for the delay. If the delay is attributable to the lender, they must compensate the borrower at a rate of Rs 5,000 for each day of delay. This penalty structure ensures that lenders are held accountable for such delays, according to Dev Ashish.

In cases where the original property documents are lost or damaged, either partially or entirely, the lender is responsible for assisting the borrower in obtaining duplicate copies and covering the associated costs. Additionally, the lender must provide compensation of Rs 5,000 for each day of delay in such cases. 

However, an additional 30 days are allowed to complete this procedure, and the penalty for the delayed period is calculated thereafter, totaling 60 days. This comprehensive approach aims to provide borrowers with a clear and fair process for obtaining their property documents while holding lenders accountable for any delays or damages.