RBI Issues Guidelines for Responsible Lending, Sets 30-Day Limit to Release Property Documents After Loan Closure

The Reserve Bank of India (RBI) took a significant step on Wednesday by introducing guidelines for banks, non-banking financial companies (NBFCs), and other regulated entities to tackle borrower-related issues and encourage responsible lending practices.

According to the RBI, regulated entities (RE) must release all original movable or immovable property documents and clear charges registered with any registry within 30 days of loan account repayment or settlement.

RBI Sets Guidelines to Ensure Responsible Lending and Swift Release of Property Documents

In a significant move to promote responsible lending conduct among banks, non-banking financial companies (NBFCs), and other regulated entities, the Reserve Bank of India (RBI) has issued guidelines for these entities to address borrower-related issues.

The new guidelines aim to facilitate swift release of property documents and strengthen the relationship between lenders and borrowers.

Swift Release of Property Documents

One of the key provisions outlined in the RBI’s new guidelines is the requirement for regulated entities to release all original movable or immovable property documents and clear charges registered with any registry within 30 days of loan account repayment or settlement.

Borrowers will also have the option to collect their property documents in person from a banking outlet, branch, or any other office of the regulated entity.

Clear Process for Return of Property Documents to Legal Heirs

To mitigate the impact of unforeseen events, such as the death of the sole borrower or joint borrowers, regulated entities must have a well-defined process for returning original movable or immovable property documents to legal heirs.

This process must clearly displayed on the regulated entities’ websites, along with other relevant policies and customer information.

Compensation for Delays

If regulated entities fail to release property documents or file the charge satisfaction form within 30 days of loan settlement, the entities must provide the borrower with a clear explanation for the delay.

The regulated entity is responsible delayed, and the borrower is entitled to a compensation of ₹5,000 per day delayed.

Assistance with Lost or Damaged Property Documents

Regulated entities are responsible for helping borrowers obtain a duplicate or certified copy of the property documents if its lost or damaged. In such situations, regulated entities cover the associated costs and must complete the process with an additional 30 days before any penalties for the delay period are calculated.

Conclusion

These new guidelines will apply to all cases where the release of original property documents is due on or after December 1, 2023. The guidelines aim to promote transparency, accountability, and fairness in the lending process and strengthen the relationship between lenders and borrowers. They will undoubtedly go a long way toward protecting the rights and interests of the borrowers and help build a more responsible, sustainable, and inclusive lending ecosystem in India.

Disclaimer:

The information provided in this article is based on the latest Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and other applicable material available at the time of compilation. We have diligently ensured the completeness and accuracy of the material. However, it is essential for users to consult the relevant legislation for specific guidance. Please note that the data provided subject to change without prior notice and should not considered as professional advice. Estabizz Fintech holds no liability for any outcomes resulting from the use of this material.