There are numerous financial institutions including banks, that fail to return collateral documents promptly even after the loan is fully repaid. The Reserve Bank is taking steps to address this issue. The Reserve Bank of India is set to implement a long-awaited customer demand. Through a new circular, the Reserve Bank has instructed banks and all other financial institutions to return the original collateral documents within 30 days after the loan repayment is complete. Institutions that do not comply will be required to compensate clients at a rate of Rs 5000 per day. If there are any difficulties in returning the documents, the customer should also receive written notification.

The RBI has requested that this proposal be implemented starting from December 1. Although a similar directive is already in place, some institutions are not adhering to it. The Reserve Bank has tightened the directive in response to widespread complaints from bank customers. The inclusion of a compensation provision in cases of refusal to return documents will greatly protect consumer interests. Family members often serve as total guarantors and obtain loans from financial institutions. If one of them passes away in the interim, the heirs should be allowed to take possession of the original collateral documents. The terms and conditions related to this should be clearly communicated to the customers when the loan is approved.

Many people have the experience of having to visit financial institutions multiple times to retrieve collateral documents, even after the loan and interest have been fully paid. Private financial institutions, cooperatives and private lenders often fall short in this regard. They withhold documents due to non-existent dues or other technical issues. Needless to say, the difficulty of not obtaining the original documents when necessary can be frustrating. If customers are in good standing, they should be able to retrieve them without unnecessary hurdles. Complaints have been raised that private financial institutions are exploiting customers in this regard. It is expected that the new guidelines from the Reserve Bank will help prevent such injustices. In an era when the friendly relationship between financial institutions and customers is deteriorating, many burdens are being unfairly imposed on customers. The only relief is that the central bank intervenes from time to time to protect customer interests. Recently, the Reserve Bank introduced a provision against excessive penalty interest charges for loan defaults. There are other issues like this that need to be addressed. It is common for many documents submitted as collateral to later go missing due to negligence on the part of institutions. In such cases, the institution itself should take responsibility. They should make an effort to find the documents or, if not possible, arrange certified copies. The entire cost of this should be borne by the institution itself.