Return asset papers within 30 days of loan repayment: RBI

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MUMBAI : The Reserve Bank of India (RBI) on Wednesday said regulated entities have to release original property documents to retail loan borrowers within 30 days of full repayment, and any delay would attract a penalty. This would include consumer credit, education loans, loans given to create or enhance immovable assets and loans for investment in financial assets like shares, debentures and others. RBI has set a penalty of ₹5,000 per day that banks must pay the borrower for each day of delay in returning the original documents.

The new directive is applicable to regulated entities, including banks, non-banking financial companies (including housing finance companies), asset reconstruction companies, local area banks and cooperative banks. In its press release, RBI noted that these regulated entities have been seen to follow divergent practices in the release of such movable and immovable property documents, leading to customer grievances and disputes. “These directions shall be applicable to all cases where release of original movable/immovable property documents falls due on or after 1 December," RBI said.

The new regulations come after following recommendations by a central bank committee headed by former deputy governor B.P. Kanungo last year, which had proposed lenders who offer home loans should compensate borrowers and pay a monetary fine if they lose property documents. “Suppose borrowers want to transfer the loan to another bank, either for interest reduction or an additional loan, the transferee lender only releases the outstanding amount once it receives the original document from the original bank.