Rs 5000/Day Penalty On Banks If They Delay Returning Property Papers After Loan Closure


Sheetal Bhalerao

Sheetal Bhalerao

Sep 19, 2023


In a recent development, the Reserve Bank of India (RBI) ordered banks and other lenders, including non-banking financial companies (NBFCs), housing finance companies and cooperative banks, to release all original movable or immovable property documents within 30 days of full repayment or settlement of personal loans by borrowers on Wednesday.

Rs 5000/Day Penalty On Banks If They Delay Returning Property Papers After Loan Closure

RBI Issues New Directive For Lenders In Country

If it gets delayed then the lenders will have to compensate the borrowers by paying Rs 5,000 for each day of delay, as directed by the RBI.

 This latest release by the country’s central bank comes as part of responsible lending conduct which will be applicable to all cases where release of original property documents is due on or after December 1 this year.

When it comes to the Personal loan, it refers to loans given to individuals and include consumer credit, education loan, loans given for creation or enhancement of immovable assets (such as housing), and loans given for investment in financial assets like shares and debentures. 

So, these new directives will be applicable to all these loan categories.

How Does It Work?

According to RBI, “The REs (regulated entities) shall release all the original movable or immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment or settlement of the loan account.”

Further adding, “In case where the delay is attributable to the RE, it shall compensate the borrower at the rate of Rs 5,000 for each day of delay. The lender will have to communicate to the borrower the reasons for such delay.”

In case of loss of, or damage to, original property documents, either in part or in full, the lender will have to assist the borrower in obtaining duplicate or certified copies of the documents and will have to bear the associated costs. 

Please note here that this cost will be in addition to the daily compensation of Rs 5,000 for each day of delay, said the RBI.

It is noteworthy here that in such cases, an additional time of 30 days will be available to the lender to complete this procedure, and the penalty for delay will be calculated thereafter, that is, after a total period of 60 days.

The borrower will be given the option of collecting the original property documents either from the banking outlet or branch where the loan account was serviced or any other office of the regulated entities where the documents are available, as per their preference, RBI noted.

Besides this, now the lender will have to mention the timeline and place of return of original property documents in the loan sanction letters issued on or after December 1 this year.

For addressing the contingent event of death of the sole borrower or joint borrowers, the RBI said that lenders will need to lay out a procedure for return of original property documents to the legal heirs.

Further, RBI said that the lenders will have to display this procedure on their website, along with other similar policies and procedures for customer information.

RBI issued this new directives after observing that the regulated entities, which are required to release all movable or immovable property documents upon receiving full repayment and closure of personal loan accounts, were following divergent practices, leading to customer grievances and disputes.


Sheetal Bhalerao
Sheetal Bhalerao
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