RBI Mandates Banks to Return Property Papers within 30 Days of Loan Repayment or Incur ₹5000 Daily Penalty

"RBI Mandates Banks to Return Property Papers Promptly upon Loan Repayment, Imposes ₹5000 Daily Penalty for Delays"

14-09-2023 New Delhi - In a significant move, the Reserve Bank of India (RBI) has instructed banks to promptly return all movable and immovable property documents within 30 days of full loan repayment and account closure.

The RBI's notification, issued on Wednesday, states that if banks fail to adhere to this timeline and are responsible for any delays, they must compensate the borrower by paying a penalty of ₹5000 for each day of delay.

Reason for Action: The RBI's action comes in response to the observation that some regulated entities (REs) have been adopting inconsistent practices in releasing property documents, resulting in customer grievances and disputes.

Compensation for Delay: The central bank has stipulated that borrowers should have the option to collect their original property documents either from the branch where the loan account was serviced or from any other office of the RE where the documents were stored. Furthermore, if the original documents are lost or damaged (partially or fully), the REs are obligated to assist the borrower in obtaining duplicate copies and cover the associated costs. However, the REs are given a 60-day window to complete this process before the daily fine of ₹5000 per day for delays comes into effect.

Applicability: These guidelines apply to property documents scheduled for release on or after December 1.

They are applicable to various financial institutions, including commercial banks (excluding Payments Banks), local area banks, primary (urban) co-operative banks, state co-operative banks, district central co-operative banks, non-banking financial companies (excluding Housing Finance Companies), and asset reconstruction companies.