RBI issues guidelines for responsible lending; sets 30 day-limit to release property documents after loan closure

The Reserve Bank of India (RBI) on Wednesday issued guidelines for banks, non-banking financial companies (NBFCs) and other regulated entities to address the issues faced by the borrowers and towards promoting responsible lending conduct among such entities.

The RBI said that the Regulated Entities (RE) shall release all the original movable or immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment or settlement of the loan account. 

Moreover, the borrower shall be given the option of collecting the original movable or immovable property documents either from the banking outlet or branch where the loan account was serviced or any other office of the RE where the documents are available, as per his preference.

In order to address the contingent event of demise of the sole borrower or joint borrowers, the REs shall have a well laid out procedure for return of original movable / immovable property documents to the legal heirs. Such procedures shall be displayed on the website of the REs along with other similar policies and procedures for customer information, the RBI notification said.

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In case of delay in releasing of original property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after settlement of loan, the RE shall communicate to the borrower reasons for such delay. 

However, if the delay is attributable to the RE, it shall compensate the borrower at the rate of ₹5,000 for each day of delay, the RBI said.

Additionally, in  case of loss or damage to original property documents, the REs shall assist the borrower in obtaining duplicate or certified copies of the property documents and shall 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.

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