RBI’s timely directive: Return property documents within 30 days of loan repayment

The Indian banking and financial services sector is experiencing a substantial evolution, driven by the latest advancements in the digital landscape. The Reserve Bank of India remains steadfast in its commitment to upholding regulatory integrity while safeguarding the interests of investors.

Personal loans have witnessed a substantial surge, primarily driven by the increased demand for vehicle loans and housing loans. The RBI has taken note of numerous complaints regarding delays in returning original property documents even after borrowers have fully repaid their personal loans. In response to this issue, the RBI has implemented a strategic solution that offers relief to these borrowers.

The Reserve Bank of India (RBI) issued comprehensive guidelines aimed at banks, non-banking financial companies (NBFCs), and other regulated entities. These guidelines are designed to tackle borrower-related challenges and foster responsible lending behaviour within these institutions. The RBI has directed that all original movable or immovable property documents must be released within 30 days following the full repayment or settlement of personal loans by borrowers.

These directives will be applicable to all instances in which the release of original property documents is scheduled on or after December 1, 2023. In the event of any delay, lenders will be required to compensate borrowers by paying a penalty of Rs 5,000 for each day of the delay.

Borrowers will have the flexibility to choose between two options for collecting their original property documents. They can either retrieve them from the banking outlet or branch where the loan account was serviced, or they may opt to collect them from any other office of the regulated entities where the documents are available, in accordance with their preference.

This development is expected to streamline the overall lending process, making it more convenient and attractive for borrowers to avail themselves of personal loans, as it reduces the related procedural challenges.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.