RBI To Banks: Return Property Papers Within 30 Days Of Repayment Or Pay Rs 5,000 A Day

The Reserve Bank of India, on Wednesday, said that banks and other lenders must release original property documents to borrowers within 30 days of loan repayment or settlement.

If they fail to do so, lenders may have to pay their borrowers a compensation of Rs 5,000 per day, the regulator said in a circular.

Regulated entities such as banks, non-banking financial institutions, housing finance institutions, asset reconstruction company, regional banks and cooperative banks come under the purview of this new directive.

Further, the banks must state the reason for delay in returning the documents. "The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law," the RBI stated in the notification.

Typically, in exchange for loans, banks keep the original property documents as collateral.

In June, a RBI committee said that banks may have to compensate borrowers and also pay a penalty if they lose the original property documents of loan seekers.

"In case of loss or damage to original movable/immovable property documents, either in part or in full, the REs (regulator entities) shall assist the borrower in obtaining duplicate or certified copies of the movable/immovable property documents and shall bear the associated costs, in addition to paying compensation," the RBI said on Wednesday.

However, in such cases, an additional 30 days will be available to the lenders to complete this procedure, and the delayed period penalty will be calculated thereafter, the RBI said.