Reserve Bank of India (RBI) through its recent circular on mandating lenders to return property documents to borrowers within 30 days came as a reliever for the customers.
The central bank also said in case of delay beyond 30 days, REs need to compensate borrowers at a rate of Rs 5,000 per day for each day of delay, and need to communicate to the borrower the reasons for such delay.
Loan against property is one of the safe and assured method of raising capital. But at the same time, a worry about the documents’ security remains in the mind of borrowers since it will stay with the lender for a long time.
What issues customers faced?
Earlier, many cases were observed or reported where after the loan is closed, the borrowers were seen rushing from pillar to post to get back the property document, which was kept as loan collateral with the lender.
There have been cases where the National Consumer Disputes Redressal Commission (NCDRC) had to come into the picture to help the victimised customers. In fact very recently, there were reports of many key private banks against whom penalty was imposed due to the loss of documents kept as guarantee by the customer.
Banks were under an obligation to return the title deeds upon payment of the entire money due under Section 60 of the Transfer of Property Act. But to garner this legal benefit, customers had to go through the whole legal process.
Through this commendable move, RBI has played a key role in establishing transparency and trust through a timeline and a set amount as penalty.
ETBFSI talked to the leading Housing Finance Companies to understand what are their perspectives on this move:
Nagendra Singh, ED, Shriram Housing Finance
The RBI’s directive to release property documents within 30 days of loan closure will be a positive for home loan customers since majority of customers repay their loan ahead of schedule. At Shriram Housing Finance we have a set of comprehensive prudential norms relating to customers, wherein we ensure that we release the property documents within 2 weeks of loan closure. At an industry level we don’t see any major impact since most lenders maintain a turnaround time of 30 days. This will also ensure that the balance transfer customers will now be able to move between lenders with ease.
Sachin Grover, Executive Director, Ummeed Housing Finance Pvt Ltd
For promoting customer satisfaction and fostering responsible lending practices in alignment with fair standards, RBI has taken a commendable step. Features like allowing borrowers to choose collection locations and mandating a 30-day document handover period will significantly improve transparency and trust. While commendable, we suggest introducing flexibility in penalizing genuine delays. While this initiative ensures timely document release, we also believe that the RBI should consider exceptional circumstances and possibly lower or grade the penalty for lenders operating in the affordable/micro segment. Prioritizing fairness and flexibility would be advantageous for both borrowers and HFCs.”
Manoj Viswanathan, MD & CEO, Home First Finance
We welcome the RBI’s new guidelines on timely release of property documents after loan closure. At Home First, swift and secure document release has been a standard practice. The new guidelines will promote responsible lending and persuade all financial institutions to improve their existing process and ensure a superior borrower experience. Standardized and stipulated compensation for delays will boost borrower confidence, fostering a transparent and customer-centric lending environment.
