The Reserve Bank of India on Wednesday issued new directions for regulated entities (REs) to promote responsible lending conduct and help borrowers. The banking authority stated in it’s release that with regards to the Fair Practices Code issued in 2003, REs are required to release all movable/immovable property documents after receiving full repayment and closure of the loan account. 


However, RBI noted that regulated entities have been found in violation of these guidelines and have often adopted ‘divergent practices in the release of such movable/immovable property documents leading to customer grievances and disputes’. As a solution for the same, the banking regulator issued new guidelines for the REs.


On the release of movable/immovable property documents, the RBI mandated that REs release all original property documents and remove charges registered with any registry within a period of 30 days from the full repayment and settlement of the loan account.






Further, the guidelines state that the borrower should be provided with the option of collecting the property documents either from the banking outlet or branch where the loan account was serviced or any other office of the RE where the documents are available, as per the borrower’s preference. 


The timeline and place of return of the documents should be mentioned in the loan sanction letters issued on or after the effective date, the release stated. Further, in the event of the demise of the sole borrower or joint borrowers, the REs should have a properly laid out procedure to return the documents to the legal heirs. This procedure should be displayed on the website of the regulated entities in addition to similar policies and procedures for customer information. 


On the matter of compensation for the delay in the release of property documents, the new guidelines state that the REs are mandated to communicate the reason for the delay to the borrower. This includes delay in providing documents or failure to file a charge satisfaction form with the relevant registry within the 30-day timeline after the complete settlement of the loan. In the event of a delay attributable to the RE, the entities are required to compensate the borrower at the rate of Rs 5000 for every day of the delay, the release added. 


In case of part/full loss or damage to the original property documents, the REs should help the borrower obtain duplicate or certified copies of the documents and bear the costs as well, in addition to paying the compensation mentioned above. However, the guidelines provide the REs with an extended timeline of 30 days to complete the procedure in such cases and state that the delayed period penalty should be calculated after the total period of 60 days. 


The RBI mandates that these directions should be applicable to all cases wherein the release of property documents is due on or after December 1, 2023. Additionally, the new guidelines state that the reimbursement provided in the new directions should be without prejudice to the rights of a borrower to get any other compensation as per any applicable law. 


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The RBI detailed the regulated entities as including all commercial banks (counting small finance banks and regional rural banks, excluding payments banks), all local area banks, all primary (urban) co-operative banks,  all state co-operative banks, district central co-operative banks, all NBFCs (including HFCs), and all asset reconstruction companies.


These directions have been issued under sections 21, 35A, and 56 of the Banking Regulation Act, 1949, 45JA, and 45L of the Reserve Bank of India Act, 1934, and section 30A of the National Housing Bank Act, 1987.