NCDRC penalizes Standard Chartered Bank for losing borrower's original document

20 Feb 2024 , 03:01 PM

Standard Chartered Bank has been fined by the National Consumer Disputes Redressal Commission (NCDRC) for misplacing a customer’s original registered sale deed. It ordered the lender to pay ₹5,000 for litigation costs, ₹5,000 for compensatory damages, and ₹5,000 for mental suffering.

The order of the NCDRC dated January 31 stated, ‘The opposite party (bank) is directed to issue a certificate in favour of the Complainant regarding loss/misplacement of original sale, deed document No. BDR/3/8895/2001. dtd.01/12/2001 executed & registered before the Sub-Registrar Kurla on 07/12/2001 and which was kept with Opposite Party for the security of house loan of Flat No.B-3/301 Lok Nisarg CHS, G.P. Read, Vaishali Nagar, Mulund (W), Mumbai .’

‘The Opposite Party (Bank) is directed to comply with the aforesaid within one month from the date of service of this order,’ the addition to the order.

Mumbai resident Pradeep Anand Shetty turned in the original sale deed for a house loan from a nearby Standard Chartered Bank branch. But when he went to sell the flat he had purchased with the loan, he found that the bank had lost the paperwork, which prevented him from upgrading, as he had intended.

There were other occasions where a bank misplaced original paperwork. The NCDRC censured ICICI Bank in September 2023 for failing to safeguard the borrower’s original documents and attempting to transfer the responsibility to a courier service. On that occasion, NCDRC ordered ICICI Bank to reimburse ₹25 lakh and provide ₹50,000 in litigation costs.

When the NCDRC demanded that IDBI Bank pay ₹20 Lakh in compensation, 1 Lakh for mental suffering and harassment, and ₹50,000 for litigation costs, the bank came under fire in February 2023. Binod and Sushma Dokania, of Gurugram, had filed a lawsuit against IDBI Bank, claiming that the bank had failed to provide proper service by misplacing or destroying the original title documents for their flat, which had been mortgaged in order to obtain a house loan.

RBI guidelines about retaining borrower documentation

On September 13, the Reserve Bank of India (RBI) changed its guidelines, requiring lenders to provide borrowers with genuine property documents within 30 days after loan repayment in full. If this is not done, there will be a penalty of ₹5,000 per day that needs to be paid to the borrower, the RBI said.

The guidelines are applicable to regulated entities (REs), which include cooperative banks, regulated banks, asset reconstruction companies (ARCs), housing finance companies (HFCs), and local area banks (LABs).

Previous recommendations from the RBI-established BP Kanungo committee stated that banks and other lenders offering home loans had to reimburse borrowers and pay a fee if they misplace the borrowers’ property documentation.

Original property documents are usually requested by banks and lenders, who hold onto them until the debts are paid back in full.

A committee report that was made public on June 5, 2023, including these recommendations as well as other proposals for raising the bar for customer service in regulated businesses.

‘Holding these documents in their original form also reduces the risk of potential disputes or fraud in the future,’ claimed the bank.

According to experts, there have been instances in the past where lenders have encountered financial and other challenges as a result of misplacing the original documentation belonging to borrowers.

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