Inside Story: Reserve Bank of India Ask Banks To Pay You ₹5,000 Per Day

For the first time, RBI has instructed banks to pay ₹5,000 per day as a penalty to borrowers for delays in returning property documents after loan repayment.

The RBI, which is India’s central bank, has issued a directive to banks and Non-Banking Financial Companies (NBFCs), in support of loan borrowers.

This directive essentially tells them that when a borrower fully repays or settles a loan, the lender (bank or NBFC) must give back all the original documents related to the property that the borrower might have used as collateral or security for the loan.

Banks Will Pay ₹5,000 Per Day To Loan Borrowers

Let’s assume that you’re a loan borrower from a particular bank.

If the bank or NBFC doesn’t follow this directive and delays in giving you back your property documents, they will have to pay you a compensation of ₹5,000 for each day of delay.

This means that if they hold onto your documents for, let’s say, 10 days longer than they should, they owe you ₹50,000 as compensation.

Why Did The Reserve Bank of India Take This Step?

The RBI decided to take this step because they noticed that different lenders were following different practices when it came to returning property documents to borrowers. This inconsistency was causing problems for borrowers, and disputes were arising.

The RBI wanted to make sure that borrowers like you are treated fairly and that you don’t have to face unnecessary delays or complications when it’s time to get your property documents back after fully paying off your loan.

Let’s Understand The Whole ‘RBI’s Directive’ Scenario In Simple Way

Imagine you are a middle-class individual who took a home loan from, let’s say, Bank of India to buy your dream house.

You diligently make your monthly payments over several years, and finally, the day arrives when you make your last payment.

Your loan is fully paid off, and you’re excited to get your property documents back from the bank.

Under the new RBI directive, Bank of India is now required to give you all your original property documents within 30 days after you make that final payment. They cannot delay this process, and if they do, they have to pay you ₹5,000 for each day of delay.

Let’s say for some reason, the bank takes an extra 20 days to hand over your documents to you. In this case, they owe you ₹100,000 (20 days x ₹5,000) as compensation for the delay.

This compensation is not just a fine; it’s meant to compensate you for any inconvenience or extra costs you might have incurred because of the delay.

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Consequences of RBI ‘Property Documents Release’ Directive

This RBI directive is a good thing for borrowers. It’s a step towards making the lending process fairer and more borrower-friendly.

It ensures that when borrowers fulfill their loan obligations and pay off their loans, they won’t have to jump through hoops or wait endlessly to get your property documents back.

However the directive also puts a burden and pressure on banks and NBFCs. They can’t delay the ‘property documents release’ process anymore, or they will have to face a huge penalty.

Usually, the banks used to charge so many penalties to their customers. But customers become helpless when Banks fail in any process. This is probably the first time, when banks will have to pay the penalties to their customers.