Repaid the Loan but Not Received the Original Documents?

Have repaid your home loan but are struggling to get back the documents from the bank?

I have never taken a secured loan but have read that the banks are not so friendly in returning the documents to the borrowers after full repayment of the loan. No matter how much you may want the original documents after loan repayment, returning the original documents to the borrowers can’t be the top priority activity for the banks. Such a lax attitude from the lenders has led to customer grievances and disputes. RBI has observed this too.

The lenders are required to release all documents pertaining to movable/immovable property upon receiving full repayment and closure of the loan accounts. However, there was no specific timeline for such release of documents. The banks could take time without any repercussions.

This will change from December 1, 2023.

The Reserve Bank has released fresh guidelines for banks that require banks to release documents to the borrowers within 30 days of full repayment of the loan. The RBI has also imposed a penalty of Rs 5,000 per day for any delay in releasing documents.

What Is the Timeline for Release of Original Documents and Charge on Property?

In a circular dated September 13, 2023, the Reserve Bank has specified the following.

  1. The lenders must release all the original documents of movable/immovable property within 30 days of full repayment/settlement of the loan account. Not only that, but the bank must also release any charge created with any registry within 30 days of full repayment.
  2. The borrower can, as per his/her preference, collect documents from the branch where the loan was serviced or the branch where the documents are available.
  3. In the event of the demise of the borrower, the bank should have a clear procedure for the return of original documents to the legal heirs. Such procedure must be available on the website of the lender.
  4. The loan sanction letters issued on or after December 1, 2023, must mention the specific timelines and the place of the return of original documents.

What Is the Penalty and What if the Bank Has Lost the Documents?

If the original documents are not returned (and the charge on assets not released) within 30 days, then the bank must communicate to the borrower the reason for delay in release of original documents and charge.

If the bank is responsible for the delay, the bank will have to pay Rs 5,000 per day for every day of delay.

In case of loss/damage to the original documents, the banks must assist the borrowers in obtaining duplicate/certified copies of moveable and immovable property. And the banks must bear the associated costs. This is over and above the penalty of Rs 5,000 per day. Hence, by assisting the borrower in getting duplicate/certified documents and bearing associated costs, the bank cannot avoid penalty. However, in this case, the bank will get a relief of 30 days. Thus, the penalty for delay will start accruing after 60 days.

The above rules are applicable to cases where release of documents is applicable on or after December 1, 2023. So, if you want these timelines to apply to the release of your documents from the bank, it is better to wait until December 1, 2023, before paying off the entire loan.

Getting access to the original documents is important because it provides comfort. Additionally, if you plan to sell the property/asset, you need those documents and release of charge on the assets. Hence, these fresh RBI guidelines are extremely friendly for the customers.

Source: RBI Circular dated September 13, 2023: Responsible Lending Conduct – Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans

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