In order to address issues faced by borrowers of personal loans in procuring release of documents relating to movable and immovable properties from regulated entities, entities regulated by the RBI (‘REs’) after full repayment and closure of loan accounts, and for promoting responsible lending conduct among REs, the RBI, by its Circular dated September 13, 2023, directed REs to undertake various measures for all cases where release of such original documents falls due on or after December 01, 2023.

Some of the key directives are as follows:

i.    REs must release all such original documents and remove charges registered with any registry within 30 days after full repayment/settlement of loan accounts;

ii.   REs must give borrowers the option to collect such original documents from the banking outlet/ branch where the loan account was serviced or any other office of the RE where the documents are available, as per the preference of the borrower;

iii.  REs must mention the timeline and place of return of such original documents in the loan sanction letters issued after the effective date of the Circular;

iv.   REs must have a well laid-out procedure for return of such original documents to legal heirs of deceased borrowers, which procedure must be displayed on the RE’s website along with other similar policies and procedures for customer information; and

v.    REs must notify borrowers of reasons for delay, if any, in release of the original documents or in filing charge satisfaction forms, and in case of a delay attributable to the RE or in case of loss/ damage to such original documents, REs must compensate the borrower at the rate of INR 5,000 (approx. US$ 60) for each day of delay, to be calculated in the manner set out in the Circular, which compensation will be without prejudice to the rights of a borrower to get other compensation under applicable law.