Directions Issued on Release of Property Documents on Repayment of Personal Loans

As part of responsible lending conduct, the RBI has issued directions streamlining the procedure for release of property documents on full repayment and closure of loan account. Although guidelines on Fair Practices Code have been issued to various Regulated Entities (REs) since 2003, it was observed that REs were following divergent practices leading to customer grievances and disputes.

The directions mandate release of original movable/immovable property documents and removal of charges registered with any registry within a period of 30 days after full repayment/settlement of the loan account. Borrowers shall also be given the option of collecting the documents as per their preference. Details pertaining to the timeline and place shall be mentioned in the loan sanction letter. The direction also addresses the contingent event of demise of sole borrower and compensation in case of delay in release or loss or damage of the documents.

The direction is applicable to all commercial banks, including SFBs, RRBs (excluding payment banks), local area banks, cooperative banks, NBFCs, HFCs, asset reconstruction companies in cases where release of original movable/immovable property documents falls due on or after December 1, 2023.