The Reserve Bank of India (RBI) has introduced new regulations mandating that regulated entities release property documents when a loan is fully paid off.

In a recent notification, the Reserve Bank of India (RBI) emphasized that, in accordance with the Fair Practices Code guidelines issued to various Regulated Entities (REs) since 2003, REs must provide all movable and immovable property documents upon the complete repayment and closure of a loan account. Nevertheless, there have been discrepancies in the practices of REs when it comes to releasing these documents, resulting in customer complaints and disputes.

Release of Movable and Immovable Property Documents

Regulated Entities (REs) are mandated to promptly release all original movable and immovable property documents, as well as clear any registered charges with relevant registries within a 30-day window following the full repayment or settlement of the loan account.

Borrowers have the flexibility to choose the location for collecting their original movable and immovable property documents. They can opt to retrieve these documents from either the original banking outlet or branch where the loan account was managed, or from any other designated office of the RE, according to their preference.

Details concerning the timeline and location for returning the original movable and immovable property documents will be explicitly outlined in the loan sanction letters issued on or after the effective date of these regulations.

To address the possibility of the sole borrower or joint borrowers encountering unforeseen events such as death, REs are required to establish a well-defined procedure for returning the original movable and immovable property documents to the legal heirs. This procedure must be made readily accessible to customers on the REs’ websites, alongside other relevant policies and procedures for customer information.

Compensation for Delay in Releasing Movable and Immovable Property Documents

If there is a delay in the release of the original movable or immovable property documents, or if the charge satisfaction form is not filed with the relevant registry within 30 days following the full repayment or settlement of the loan, the Regulated Entity (RE) is obligated to inform the borrower about the reasons for the delay. When the delay is due to actions or negligence on the part of the RE, the borrower shall be entitled to compensation at the rate of ₹5,000 per day for each day of delay.

In cases of loss or damage to the original movable or immovable property documents, whether in part or in full, the REs must assist the borrower in obtaining duplicate or certified copies of these documents and cover the associated costs. Additionally, the compensation mentioned in paragraph 6 above will apply. However, in such instances, the REs will have an extended period of 30 days to complete this process, and the penalty for the delayed period will be calculated accordingly (i.e., after a total period of 60 days).

It’s important to note that the compensation outlined in these directives is provided without prejudice to the borrower’s rights to seek additional compensation under any applicable laws.

These guidelines shall apply to all instances where the release of original movable or immovable property documents is scheduled on or after December 1, 2023.

The aforementioned directives have been issued in accordance with the provisions of sections 21, 35A, and 56 of the Banking Regulation Act, 1949, sections 45JA and 45L of the Reserve Bank of India Act, 1934, and section 30A of the National Housing Bank Act, 1987.