Introduction: The Reserve Bank of India (RBI) has issued a significant directive addressing responsible lending conduct among financial institutions. This directive pertains to the release of movable and immovable property documents upon the full repayment or settlement of personal loans. This move aims to streamline practices and prevent customer grievances related to the release of such documents.
1. Release of Property Documents: According to the RBI’s guidelines, regulated entities (REs) are mandated to release all original movable and immovable property documents within 30 days after the complete repayment or settlement of the loan account. This provision ensures that borrowers regain ownership of their assets promptly.
2. Borrower’s Choice: Borrowers will have the flexibility to collect their original property documents either from the branch where the loan account was serviced or any other office of the RE where the documents are available, based on their preference. This added convenience enhances the borrower’s experience.
3. Transparency in Loan Sanction Letters: The RBI emphasizes the importance of transparency by requiring REs to specify the timeline and location for returning original property documents in loan sanction letters issued on or after the effective date. This clarity ensures that borrowers are aware of the process.
4. Legal Heirs’ Rights: In cases of the borrower’s demise, the RBI mandates that REs have a well-defined procedure for returning property documents to legal heirs. This procedure must be readily accessible on the REs’ websites, promoting transparency and customer awareness.
5. Compensation for Delay: To discourage delays in the release of property documents, the RBI introduces compensation measures. If REs fail to release documents or file charge satisfaction forms within 30 days, they must communicate the reasons for the delay to the borrower. In cases where the RE is responsible for the delay, they must compensate the borrower at the rate of ₹5,000 per day of delay.
6. Loss or Damage: In the unfortunate event of loss or damage to original property documents, either partially or entirely, REs must assist the borrower in obtaining duplicate or certified copies. The REs will bear the associated costs and pay compensation as mentioned in paragraph 5. However, they are granted an additional 30 days to complete this process.
7. Additional Legal Rights: The compensation provided under these directives does not affect a borrower’s rights to seek further compensation as per applicable laws. This provision safeguards the borrower’s interests.
Conclusion: The RBI’s recent directive on responsible lending conduct regarding the release of movable and immovable property documents signifies a significant step towards improving transparency and customer satisfaction in the lending industry. These guidelines, effective from December 1, 2023, aim to protect borrowers’ rights and ensure a smoother, more accountable lending process. Financial institutions are now required to adhere to these regulations, enhancing the overall borrowing experience for consumers.
Reserve Bank of India
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.
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.
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.
(Santosh Kumar Panigrahy)
Chief General Manager
1 As defined in Annex to the Circular on ‘XBRL Returns – Harmonization of Banking Statistics’ dated January 04, 2018