RBI’s new rules ensure faster release of property documents for borrowers

If you have a home loan or a loan against any property/security, then you have a reason to smile.

RBI, on September 13, 2023, came out with a notification stating that banks and NBFCs (non-banking financial company) must release all the movable or immovable property documents given as collateral within 30 days from the day the borrower fully repays or settles the loan.

In this story, let’s delve into what this is all about.

Disputes in the past

When you take a home loan, the security is typically the property itself by way of depositing the title deeds. For other personal loans, banks also accept life insurance policies (which have a surrender value), shares/securities and investments like NSC (National Savings Certificate) etc. as collateral.

When a loan is settled by the borrower, different banks have been following different practices of releasing such documents and there were customer grievances and disputes. Imagine settling a loan with the bank/NBFC but property still under mortgage.

RBI wants to streamline the process of releasing documents that are due from December 1, 2023.

Here’s what the RBI says–

1. The documents must be released by the lender within 30 days of loan closure. No encumbrance after that.

1. Borrowers will have an option to collect those documents either from the branch office where the loan was sanctioned or any other office where the documents are available.

2. The timeline and place of return of such documents has to be mentioned by the lender in the loan sanction letters.

3. Lenders must have a standard procedure on how to return the documents to legal heirs, when the borrower or joint borrowers die.

4. In case of delay in releasing documents, the bank/NBFC has to pay a fee to the  borrower – ₹5,000 for each day of delay.

5. If there is a loss/damage to documents, the lender must assist you in getting the duplicate/certified copies by covering the extra charges. In this case, the 30 days limit will be extended by another 30 days. If there is a delay even after 60 days, the lender will be liable to pay Rs 5,000 per day until the documents are returned to the borrower.

Note that NBFCs also include housing finance companies (HFCs). With RBI rules coming into effect from December 2023, you are expected to have a smooth experience in getting your property/security released from mortgage.