RBI’s Guidelines for Banks, NBFCs & ARCs on Releasing Property after Loan Repayment

Ankita Tiwari

29 Sep, 2023

The Reserve Bank of India has issued directions for all Banks, NBFCs & ARC’s for Responsible Lending Conduct – Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans vide Notification No. RBI/2023-24/60 dated 13^th September 2023.

Applicability

This direction applies to all cases where the release of original movable or immovable property documents falls due on or after 1 December 2023.

Recipient Entities

Under which provisions is this direction issued?

These directions are issued under sections 21, 35A and 56 of the Banking Regulation Act, 1949, Section 45JA and 45L of the Reserve Bank of India Act, 1934 and Section 30A of the National Housing Bank Act, 1987.

Responsible Lending Conduct – Release of Movable/Immovable Property Documents on Repayment /Settlement of Personal Loans

As per the guidelines on the Fair Practices Code issued to various Regulated Entities (Res) since 2003, the REs must release all movable or immovable property documents upon receiving full repayment and closure of the loan account. However, it has been observed that the REs follow divergent practices in the release of such movable/immovable property documents, leading to customer grievances and disputes. The following directions were issued to address the issues faced by the borrowers and to promote responsible lending conduct among the REs:

Release of Movable/Immovable Property Documents

1.  The REs shall release the original movable/immovable property documents and remove charges registered with any registry within 30 days after the full repayment/settlement of the loan amount.
2. 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 his/her preference.
3. 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.
4. To address the contingent event of the demise of the sole borrower or joint borrowers, the REs shall have a well-laid-out procedure for the return of original movable/immovable property documents to the legal heirs. Such procedure shall be displayed on the RE’s website along with other similar policies and procedures for customer information.

Compensation for delay in release of Moveable/Immovable Property Documents

• In case of delay in the release of original movable/immovable property documents or failure to file charge satisfaction form with the relevant registry beyond 30 days after full repayment/settlement of the loan, the RE shall communicate to the borrower the reasons for such delay. In the case where the delay is attributable to the RE, it shall compensate the borrower at the rate of INR 5,000/- for each day of delay.
• In case of loss or 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. They shall bear the associated costs and pay compensation, as indicated inin paragraph 6 above. However, in such cases, an additional time of 30 days will be available to the REs to complete this procedure and a delayed period penalty will be calculated after that (i.e., after a total period of 60 days).
• The compensation provided under these directions shall be without prejudice to the borrower’s rights to get any other compensation as per any applicable law.

Conclusion

In summation, it can be said that the directions are issued to address the issues faced by the borrowers and to promote responsible lending conduct among the REs.