New Delhi, India
September 13, 2023
In a move aimed at providing substantial relief to home loan and personal loan borrowers, the Reserve Bank of India (RBI) has announced stringent guidelines to ensure the prompt return of property documents upon loan repayment. These landmark regulations, set to take effect on December 1, 2023, come as a response to customer grievances and disputes arising from varying practices among lenders.
Under these new guidelines, financial institutions are now required to adhere to a 30-day timeline for the release of property documents upon full repayment of a personal loan. Failure to meet this deadline will result in a significant penalty, with lenders compensating borrowers at a rate of Rs 5,000 per day for any delay in document release.
The RBI’s move also emphasizes accessibility and convenience for borrowers. Lenders are directed to ensure that property documents are readily available either at the branch where the loan was serviced or at another office, depending on the borrower’s preference. This provision aims to eliminate the inconvenience often associated with retrieving essential documents.
Furthermore, the regulator has introduced measures to address situations where original property documents are lost or damaged. In such cases, lenders are obligated to assist borrowers in obtaining duplicate or certified copies and bear the associated costs. However, lenders have an additional 30 days to complete this procedure, with penalties calculated after 60 days in case of any delay.
Transparency and communication are central to these new regulations. Lenders are now required to specify in their sanction letters when and where the original property documents will be returned. Additionally, lenders must establish a clear procedure for returning property documents to legal heirs in the unfortunate event of the borrower’s demise. These procedures must be publicly available on the lender’s website, ensuring borrowers are well-informed.
To prevent unnecessary delays and disputes, lenders are also obligated to inform borrowers of the reasons for any delays in releasing property documents or filing charge satisfaction forms with the relevant registry beyond the 30-day limit following full repayment. If the delay is attributable to the lender, they must compensate the borrower at the stipulated rate.
The RBI’s decision to implement these comprehensive rules reflects its commitment to promoting responsible lending conduct among regulated entities while safeguarding the interests of borrowers. This significant step gives financial institutions a little over two months to align their logistics and IT systems to comply with the new regulations, signaling a positive shift towards greater transparency and efficiency in the lending industry.
