The Reserve Bank of India (RBI) has announced on Wednesday that regulated entities must provide original property documents to retail loan borrowers within 30 days of full repayment, and any delay in filing the required documents will result in a penalty charge.
The RBI has imposed a daily penalty of 5,000 on banks for failing to return original documents within one day, which includes consumer credit, education loans, loans to create or enhance immovable assets, and loans for investment in financial assets such as shares and debentures.
The new directive applies to regulated entities such as banks, non-banking financial companies (including housing finance companies), asset reconstruction companies, local area banks and cooperative banks.
According to the press release issued by the RBI, these regulated entities have been found to be following different practices when it comes to publishing documents on both movable and immovABLE properties, which has resulted in customer complaints and disputes.
The RBI declared that the directions would be valid for all cases where original movable/immovABLE property documents are due on or after 1 December.
Following recommendations from a central bank committee chaired by ex-deputy governor B.P, Kanungo, lenders who provide home loans should compensate borrowers and pay hefty fines if they falsify property documents, as per the new regulations.
According to D.S. Tripathi, executive vice-chairman of Aadhar Housing Finance, if borrowers want to transfer their loans to another bank for interest reduction or additional loan, the lender responsible for the transfer will release the outstanding amount only after receiving the original document from the first bank and any delays in the payment of the extra amount.
Original property documents are utilized to establish ownership and facilitate future transactions. Typically, banks ask customers to provide ownership documents as security against the loan. In case of default, these documents serve as a means of recovering their dues.
According to bankers, there are several instances where property documents are delayed.
The borrower may be held accountable by banks who do not hand over the document or store it elsewhere. Additionally, a delay is experienced when multiple parties agree to discharge their debts.