Responsible Lending Conduct – Release Of Movable/Immovable Property Documents On Repayment/ Settlement Of Personal Loans

The Reserve Bank of India (RBI) vide Notification, RBI/2023-24/60, dated 13.09.2023, focuses on responsible lending conduct, particularly concerning releasing movable and immovable property documents upon repayment or settlement of personal loans.

The circular has issued guidelines to address the problems the borrowers face and encourage responsible lending behaviour among REs. The genesis of these directives lies in the wide-ranging disparities witnessed in releasing property documents across various REs. These inconsistencies have generated an avalanche of customer complaints and disputes. The RBI's decisive action seeks to standardize this process and promote a uniform culture of responsible lending conduct, thereby mitigating the frustrations borne by borrowers due to operational discrepancies.

Key Points -

The RBI continues to uphold its commitment to ensuring fair and transparent practices in the banking sector. This Notification is a reflection of that commitment and specifies the following directions for the REs:

• The REs shall release all the original movable/immovable property documents and remove charges registered with any registry within 30 days after full repayment/settlement of the loan account.

• 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.

• 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.

• The REs shall have a well laid out procedure for the return of original movable/immovable property documents to the legal heirs in case of demise of the sole borrower or joint borrowers. Such procedure shall be displayed on the website of the REs along with other similar policies and procedures for customer information.

• In case of delay in releasing original movable/immovable property documents or failure to file charge satisfaction form with the relevant registry beyond 30 days after full repayment/settlement of loan, the RE shall communicate to the borrower reasons for such delay. In the case where the delay is attributable to the RE, it shall compensate the borrower at the rate of ₹5,000/- for each day of delay.
• In case of loss/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 documents and shall bear the associated costs, in addition to paying compensation as indicated above.

Benefits For The Borrowers-

The notification will benefit the borrowers by ensuring timely and hassle-free release of their movable/immovable property documents after loan repayment or settlement. It will also provide them with adequate compensation in case of any delay or loss/damage caused by the REs. Moreover, it will enhance transparency and accountability among the REs and foster customer trust and satisfaction.

Legal Implication For Customers-

This Notification has significant legal implications for customers who have availed personal loans from banks. It mandates banks to release all documents related to movable and immovable properties immediately upon repayment or settlement of personal loans. This is a legally binding obligation on the part of the banks.

Conclusion

The RBI's new Notification is a step towards enhancing transparency and fairness in lending practices. It ensures that customers' rights are protected and that they have access to their property documents promptly after loan repayment.