Rs 5000 fine per day! RBI issues guidelines on timely return of property documents after loan repayment

The Reserve Bank of India has issued a notice to banks and other financial institutions, instructing them to return all original property papers within 30 days after the full repayment of the loan by the borrower. 

As per the notice, failing to adhere to the instructions would require the Regulated Entities (REs) to compensate the borrower at a rate of Rs 5,000 per day of delay.

The RBI has observed that different REs follow different practices when it comes to releasing property documents in such cases. This leads to customer complaints and disputes. Hence, in order to ensure uniformity and adherence to fair practices, the RBI has mandated the REs to release all original property documents and remove any registered charges within 30 days of full repayment of the loan. In case of delay, the REs will have to give a proper justification.

Borrowers will have the option to collect their original property documents either from the bank branch where the loan was sanctioned or from the RE office, based on their preference. The loan sanction letters issued on or after the effective date will have to specify the timeline and location for the return of these documents.

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To address situations where the borrower passes away untimely, the RBI has instructed the REs to establish clear procedures for returning original property papers to their legal heirs. These procedures are to be made available on the website of the REs, along with other relevant policies and procedures for customer information. 

Regarding loss or damage to original property papers, the issued notice mentions that REs should assist borrowers in obtaining duplicate or certified copies, covering associated costs, and providing required compensation. However, in such cases, REs will have an additional 30 days to complete the procedure, with penalties calculated thereafter. 

It is important to note that the compensation mentioned in the directive does not affect a borrower’s right to seek further compensation under other applicable laws. As per RBI’s announcement, the notice is applicable to all cases where the release of original property documents is due on or after December 1, 2023.