RBI to levy penalties on banks that lose property papers of borrowers

Banks may have to compensate borrowers and also pay a penalty if they lose the original property documents of loan seekers. This could soon become a possibility if the RBI accepts the recommendations of a high level committee, which it had formed in May last year to review customer service standards in banks and other lending institutions. 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. The panel has suggested that the RBI may consider stipulating a time limit for banks to return the property documents to the borrower from the date of closure of the loan account, failing which a penalty or a compensation linked to the extent of delay should automatically be paid by the banks to the borrower. “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. Normally banks request for original property documents and keep them until the loans are fully repaid. However these recommendations have come as the RBI has received several complaints that banks take a lot of time to return property documents even when the loan has been repaid on time. Original property documents are essential, as they help in establishing ownership and preventing disputes.