After full loan repayment, banks and financial institutions must deliver original property documents and remove charges within 30 days, according to the RBI. The directive aims to promote responsible lending…
The Reserve Bank of India (RBI) on Wednesday ordered banks and financial institutions to release all original movable or immovable property documents and remove charges recorded with any registry within 30 days after the borrower has fully repaid a loan. This directive was made in an effort to promote responsible lending.
According to a statement from the RBI, regulated entities (REs) who disobey the directive must pay the borrower Rs 5,000 for every day they are late. Currently, lenders distribute such moveable or immovable property documents using different procedures, which causes consumer complaints and disagreements.
The RBI instructed “REs 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” as part of the Fair Practices Code and to “make things uniform.” It said that if this took longer than expected, the RE would explain why to the borrower.
The original moveable and immovable property documents may be obtained by the borrower, in accordance with her or his preference, either from the banking outlet/branch where the loan account was serviced or from any other RE office where the documents are available.
The loan sanction letters issued on or after the effective date would include information about the schedule and location for returning the original moveable and immovable property documents, it said. According to the RBI, REs must have a clear system in place for returning the original movable and immovable property documents to the legal heirs in the event that the sole borrower or joint borrowers pass away. Such a method, along with other similar policies and procedures for consumer information, would be available on REs’ websites, it was stated.
Conclusion
The Reserve Bank of India (RBI) has ordered banks and financial institutions to release all original movable or immovable property documents and remove charges registered with any registry within 30 days after a borrower has fully repaid a loan. This directive aims to promote responsible lending and requires regulated entities (REs) to pay the borrower Rs 5,000 for every day they are late. The RBI instructed REs to make things uniform and provide the documents to the borrower in accordance with their preference. The documents can be obtained from the banking outlet or other RE office. The RBI also requires REs to have a clear system for returning these documents to legal heirs in case of the borrower’s or joint borrowers’ death..
