Big relief for borrowers with loan against properties

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In a move that will offer massive relief to all borrowers who have taken a loan against their properties like gold, real estate and the like, the RBI has directed all banks, non-banking finance entities (NBFCs) and Asset Reconstruction Companies (ARC) to promptly hand over all the original documents associated with the borrower’s hypothecated property within 30 days of them fully settling and paying back their loan. 

Additionally, any charges levied and recorded with any registry on such properties should also be removed within this time frame. Read on to find answers to all your questions on this matter. 

Remind me of movable and immovable properties again? It’s all about how easily you are able to move your assets around i.e. how mobile they are. For instance, it is impossible to move a piece of land you own or your house from one place to another. Hence, that is immovable property. On the other hand, your jewellery, shares, and vehicles can be transferred and moved around. That constitutes your movable property. 

When will this regulation come into effect? In just over two months, starting December 1, 2023. This means that all loans against properties, which are either due on December 1, 2023, or are payable post this date will have to follow these rules. This rule is not applicable retrospectively.

What happens if the bank does not follow this? You will be eligible for a compensation of up to Rs 5,000 per delayed day, if the hold-up is on part of the bank or NBFC. These regulated entities are liable to intimate you in case of delays. 

Will the bank pay if my property papers are lost or damaged? Yes, indeed. Not just that, the loan issuing entity, be it your bank or NBFC, will also have to compulsorily assist you in obtaining duplicate property papers, and bear the cost of that as well. For all this, the entity will be given an additional 30 days. So, the borrower will be eligible to receive Rs 5,000 per delayed day, after 60 days have passed. 

How will I know when to collect my property’s papers? Your loan sanction letter, which you receive on your loan approval, will now mention the timeline and place from where you can collect your property documents from. 

Where can I collect the papers from? From the same branch of the bank from where you availed the loan, or any other of its other branches or offices, where the documents are available per your convenience. The bank has to give you both the options. In case the borrower, or both of them pass away in case of a joint loan, the bank has to lay down a procedure to give back the papers back to their legal heirs. The procedure for the same has to be mentioned clearly on their website.