RBI to levy penalties on banks that lose property papers of loan seekers

Banks may have to compensate borrowers and also pay a penalty if they lose the original property documents of loan seekers

If banks misplace the original property documents of loan applicants, they may be required to give borrowers compensation as well as a penalty.

If the Reserve Bank of India (RBI) follows the advice of a high-level committee it established in May of last year to examine customer service standards in banks and other lending institutions, this may soon become a reality, reported the news agency IANS.
 

The panel led by former deputy RBI governor B P Kanungo, presented its report to the central bank in April this year, and this suggestion is a part of a slew of recommendations made in it.

The RBI has invited comments from stakeholders by July 7 on the committee's recommendations.

According to the report, the panel has recommended that the RBI might take into account setting a deadline for banks to give the borrower their property documents after the loan account is closed, failing which the banks should automatically pay the borrower a fine or compensation based on the length of the delay.

"In case of loss of property documents, the bank should not only be obligated to assist in obtaining certified registered copies of documents at their cost but also compensate the customer adequately, keeping in view the time taken to arrange the alternate copies of the documents," the panel has suggested.

Original property documents are usually requested by banks, that retain them until the loans are completely returned.

However, the RBI has received numerous complaints alleging that banks take a long time to deliver property documents, even after the loan has been paid back on schedule.

Original property records are crucial since they establish ownership and help to avoid disputes.

(With inputs from IANS)