The Reserve Bank of India (RBI) has recently issued new directives to Regulated Entities (REs), including banks and non-banking finance companies (NBFCs). The aim is to address challenges faced by borrowers during loan settlement. As of December 1, 2023, these guidelines have become effective. In line with the RBI's instructions, banks and NBFCs are now required to promptly release all original movable and immovable property documents. This action must be taken within 30 days following the full repayment or settlement of the loan account. Additionally, the institutions are mandated to remove any charges registered with any registry during this specified timeframe. 

Non-compliance with this directive carries consequences. Failure to adhere to the stipulated timeline for releasing crucial documents, post-loan settlement, will incur a penalty. Specifically, financial institutions could face a daily fine of Rs 5,000/- for any delays in the timely release of these essential documents. 

The RBI has given these instructions based on specific sections of key banking laws, including the Banking Regulation Act of 1949 (sections 21, 35A, and 56), the Reserve Bank of India Act of 1934 (sections 45JA and 45L), and the National Housing Bank Act of 1987 (section 30A). 

The RBI has instructed banks, NBFCs, ARCs, LABs, and Co-Op Banks to release all property documents within 30 days after full loan repayment. Borrowers can choose to collect their property documents either from the loan-serving branch or any other office of the lending institution based on their preference. 

“The timeline and place of return of original movable/immovable property documents will be mentioned in the loan sanction letters issued on or after the effective date.” the circular said. 

In the event of the borrower's death, REs must have a clear procedure to return property documents to the legal heirs. If there's a delay in releasing property documents or filing charge satisfaction forms after loan settlement, the RE will inform the borrower about the reasons for the delay. If the delay is the fault of the RE, they will compensate the borrower with Rs 5,000 for each day of delay.  If original property documents are lost or damaged, REs will help the borrower get duplicate or certified copies, covering all related costs and providing compensation. 

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