The Reserve Bank of India (RBI) has asked lenders to 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.

Further, the lenders need to mention the timeline and place of return of original movable / immovable property documents in the loan sanction letters issued on or after the effective date.

The aforementioned directives, which are part of RBI’s circular on “Responsible Lending Conduct – Release of Movable / Immovable Property Documents on Repayment/ Settlement of Personal Loans”, come in the wake of divergent practices followed by lenders in release of movable / immovable property documents leading to customer grievances and disputes.

The directives are applicable to regulated entities/ REs -- banks, non-banking finance companies (NBFCs), including housing finance companies (HFCs), and asset reconstruction companies (ARCs).

The borrower should 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, per the circular.

In order to address the contingent event of demise of the sole borrower or joint borrowers, the REs need to have a well laid out procedure for return of original movable / immovable property documents to the legal heirs.

Such procedure has to be displayed on the website of the REs along with other similar policies and procedures for customer information.

Compensation for delay

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 is required to communicate to the borrower reasons for such delay.

RBI said, in case where the delay is attributable to the RE, it has to compensate the borrower at the rate of ₹5,000 for each day of delay.

In case of loss/damage to original movable / immovable property documents, either in part or in full, the REs should assist the borrower in obtaining duplicate/certified copies of the movable / immovable property documents and should bear the associated costs, in addition to paying compensation.

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 (that is after a total period of 60 days).

RBI underscored that the compensation provided under its directions will be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.

These directions will be applicable to all cases where release of original movable / immovable property documents falls due on or after December 1, 2023.