Banks to compensate borrowers, pay penalty if they lose property documents?

In future, banks may need to compensate as well as pay a penalty if they end up losing the original property documents of borrowers. The recommendation was made by a high level committee and could be a possibility if it is accepted by the Reserve Bank of India.

The high level committee was formed by the RBI last May. Its aim was to review customer service standards in banks and other lending institutions. Led by former deputy RBI governor B P Kanungo, the panel presented its report to RBI in April 2023. 

The RBI has invited stakeholders to comment on the committee’s recommendations by July 7. The suggestion on property papers is part of a slew of recommendations made by the panel

As per the recommendation, the RBI may consider stipulating a time limit in which banks have to return property documents to loan seekers from the date of closure of the loan account. Failing this, a penalty or a compensation linked to the extent of delay should automatically be paid by the banks to the borrower, it said. 

“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.

(Inputs from IANS)