PSBs face FinMin heat over delay in release of customers' property docs

The Union Ministry of Finance has chided public-sector banks (PSBs) for failing to promptly release property documents to customers who have repaid loans, calling the lenders’ conduct “unsatisfactory”, according to a senior government official. The backlog of such cases reduced from 29,500 in August 2024 to 20,800 in February 2025. 

“The delays are a breach of customer trust, so the finance ministry has directed PSBs to fix accountability, set strict timelines, and ensure faster release of pledged assets, warning that such lapses damage the public image of PSBs,” said the official on condition of anonymity. 

State Bank of India has 18,000 pending cases and Bank of Baroda has around 1,000 cases, said the official. The two companies had not responded to Business Standard’s emails till Friday evening. 

In September 2023, the Reserve Bank of India (RBI) said that regulated entities (RE) should release original movable and immovable property documents and drop charges for the registry within 30 days after full repayment and settlement of a loan account.  ALSO READ: Why are GCCs in India, touted as the next big thing, in a tax tangle? 

For delays of more than 30 days and attributable to REs, companies will have to compensate borrowers at a rate of ~5,000 per day. REs must also communicate the reasons for the delay to the borrower. The RBI had issued the directives to help borrowers and make REs responsible. 

“These directives from the finance ministry to expedite pending cases are particularly relevant for retail loans, such as home, vehicle, and loan against property, and also to avoid penalty from the regulator,” said a senior bank executive responsible for legal affairs. 

Segregation of banking functions has led to documents being stored in different places, such as loan processing centres. It has resulted in delays in delivering documents to borrowers upon full payment. The RBI had said REs are following divergent practices in releasing movable and immovable property documents, causing customer grievances and disputes. 

In cases where the property documents are lost or damaged, either in full or in part, the lender will be responsible for assisting the borrower in obtaining duplicate or certified copies of the movable/immovable property documents. The lender will also bear the associated costs, in addition to paying compensation, the RBI had said. However, in such instances, the REs will have an additional 30 days to complete this procedure, and the penalty for the delayed period will be calculated thereafter.