Closed Your Home Loan, But Bank Holding Back Documents? How To Get Them Back

Borrowers typically need to submit a comprehensive set of documents at the time of applying for a home loan. While the key documents remain the same, they may vary slightly depending on whether the applicant is salaried, self-employed, or an NRI.

All applicants need to submit proof of identity, proof of age, proof of residence, and bank account statements for the last 6 months, along with the completed application form. In addition, you will also have to submit income proof such as salary slips, employment proof, Form 16, ITRs, bank statements if you are salaried or balance sheet and profit & loss account, attested by a chartered accountant, business licence or professional practice licence, and proof of business address, if you are self-employed.

"Apart from these documents, you will be required to submit property documents, such as the sale deed, title deed, agreement to sell, possession letter, NOC from builder/society, approved building plan, encumbrance certificate, tax paid receipts, etc. These original property documents are held as collateral," says Adhil Shetty, CEO, BankBazaar.com.

Getting Original Documents After Loan Closure

Banks are required to return the original property documents within 30 days after full repayment of a loan. The charges and lien registered with property registries also need to be removed by the lenders during the same period.

The loan sanction letters will specify both the time-frame and location where the original property documents must be returned. The lender must provide the borrower with clear reasons about document return delays.

Missing Documents

Loss of original property documents by lenders are relatively rare. The most common reason for missing documents is misfiling or mixing up of documents across branches. Most documents are not digitised and at times the tracking and storage protocols are insufficient. Natural disasters or accidents such as fire, flooding, or other incidents at storage facilities is another factor.

If the lender loses your original property documents, either in part or in full, it is mandated to help you get duplicate or certified copies.

"The bank has to bear all costs involved in retrieving or recreating the lost documents. In such cases, the lender has another 30 daysdays' to fulfil its obligation. If it fails to deliver the documents or certified copies even after that period, it will have to pay a penalty of Rs 5,000 per day until the issue is resolved," says Shetty.

What To Do If Documents Get Misplaced?

As a borrower, discovering that your original property documents are missing can be extremely distressing, but it's important to take structured approach to not only protect your rights as well as retrieve the documents.

"The initial approach is to insist on a written response from the bank clearly stating that the documents are untraceable or lost. This will create an official record of the situation and will be important if you need to take further legal steps which may include legal action under the Consumer Protection Act, 2019 or approaching the authorities under the guidelines issued by the Reserve Bank of India," says Nivedita Bhardwaj, Partner, King Stubb & Kasiva, Advocates and Attorneys.

It is always mandatory to ensure that there is no reliance placed on verbal assurances from the bank or any other authorised representatives of the bank. Subsequent to creating a record without any delay, you need to file a written complaint with the bank's grievance redressal officer, and ensure it is acknowledged with a dated receipt or email confirmation.

You may, in your complaint, request the bank to initiate an internal investigation and trace the documents. The communication details for the bank's grievance redressal officer will be mentioned in the bank documents available with you.

"If the documents are confirmed to be irretrievably lost, you may ask the bank to issue a 'non-traceable certificate' in writing which will then act as preliminary evidence in lodging a First Information Report (FIR) with the local police station," informs Bhardwaj.

When Should A Borrower Escalate The Matter To Banking Ombudsman?

The RBI Integrated Banking Ombudsman is a powerful remedy when a bank fails to provide a timely or satisfactory resolution to a customer grievance, including lost property documents.

"You may escalate the matter if the bank has not resolved your written complaint within 30 days of lodging it, or if the bank's response is vague, non-committal, or does not assist you in acquiring replacements for lost documents or if the bank refuses to issue a written acknowledgment (such as a non-traceable certificate) or denies responsibility," suggests Bhardwaj.

Steps to approach the Banking Ombudsman:

• First, file a formal written complaint with the bank, addressed to their Grievance Redressal Officer or branch manager. Retain proof of submission. The details of the Grievance Redressal Officer shall be mentioned in the banking documents provided to you. If the same is not specified for any reason, you may come across the Grievance Redressal Officer's details on the bank's official website.

• If unresolved after 30 days, you can file a complaint online via the RBI's Complaint Management System (CMS).

• You may choose to physically write to the Ombudsman office with copies of your original complaint, bank's response (if any) and along with supporting documents like FIR, closure certificate, etc.

When To Approach A Consumer Court?

A borrower can invoke the jurisdiction of the Consumer Disputes Redressal Commission (District, State or National, depending on pecuniary jurisdiction) under the Consumer Protection Act, 2019 if:

• The bank/lender has indulged in deficiency of service or unfair trade practice by withholding the property documents despite loan closure.

• There is harassment or unreasonable demand (such as asking for extra fees) as a condition for returning the documents.

• The borrower has suffered mental agony, financial loss, or loss of opportunity due to the lender's conduct.

"The consumer forum may direct the bank to forthwith release the property documents, or compensation for mental agony, harassment, and any consequential financial loss can be awarded. The forum may also impose litigation costs on the bank, and in aggravated cases, punitive damages can be awarded under Section 39 of the Consumer Protection Act, 2019," informs Amit Kumar Nag, Partner, AQUILAW.

It is settled law that failure to return title deeds amounts to deficiency of service. More recently, the National Consumer Disputes Redressal Commission (NCDRC) has consistently held banks liable for withholding property documents even after loan closure.

Conclusion

The borrower must first demand the documents and closure certificates from the lender in writing and keep proper acknowledgement.

"If the lender is non-cooperative or unduly delays, the borrower may simultaneously escalate the matter to the RBI Ombudsman and/or initiate proceedings before the Consumer Forum for return of documents and compensation. These remedies are independent and can be pursued concurrently," says Nag.