The Reserve Bank of India (RBI) has given protection to borrowers when their property documents are not returned by the banks or financial institutions within a month after the complete payment of the loan.

The central bank on Wednesday directed banks and financial institutions to release all original movable or immovable property documents and remove charges registered with any registry within 30 days after full repayment of a loan by the borrower.

Failing to comply with the direction, regulated entities (REs) would compensate the borrower at the rate of Rs 5,000 for each day of delay, RBI said in a notification.

RBI noted that REs follow divergent practices in release of such movable or immovable property documents leading to customer grievances and disputes.

As part of Fair Practices Code and to make things uniform, RBI asked "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." 

In case of delay in doing so, it said, the RE would communicate to the borrower reasons for such delay.

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 her/his preference, it said.

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, it said.

In order to address the contingent event of demise of the sole borrower or joint borrowers, RBI said, REs shall have a well laid out procedure for return of original movable/immovable property documents to the legal heirs.

Such procedure would be displayed on the website of REs along with other similar policies and procedures for customer information, it said.

With regard to loss/damage to original movable/immovable property documents, the notification said, REs would assist the borrower in obtaining duplicate/certified copies of such documents and would bear the associated costs, in addition to paying compensation.

"However, in such cases, an additional time of 30 days will be available to REs to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days)," it said.

The compensation provided under these directions would be without prejudice to the rights of a borrower to get any other compensation as per any applicable law, it said.

These directions would be applicable to all cases where release of original movable/ immovable property documents falls due on or after December 1, 2023, RBI said.

Incidentally, the National Consumer Disputes Redressal Commission (NCDRC) directed ICICI Bank earlier this month to pay Rs 25 lakh compensation for losing the original property title documents of a complainant which were deposited with the bank for availing a housing loan.