Friday, 14 June 2013

What if a Bank Lost Title Deeds of a Home Loan Borrower

Its a scary question. But trust me, this happens very frequently in India. Home Loan borrowers have to deposit original title deeds of a property with their banks. Many times, after the loan is repaid in full, the banks do not return the original title deeds to the borrowers. Title deeds are reported to be misplaced or lost. Things get worse after this. Indian Banks Association has a model compensation policy that was adopted by almost all the banks in India. I saw the compensation policy of State Bank of India that specifies the compensation payable to a borrower in case State Bank of India is unable to return original property title deeds after repayment of home loan. This is what the policy says: "...In the event of loss of title deeds to mortgaged property at the hands of the Banks, the compensation will cover out of pocket expenses for obtaining duplicate documents plus a lump sum amount as decided by the Bank in the following manner: The Bank would pay the compensation for delay in return of securities/documents/title deeds to the mortgaged property beyond 15 days of repayment of all dues agreed to or contracted, subject to above conditions, @ Rs.100/- per day subject to maximum Rs.5000/- to the borrower." Keep Reading...

If you are shocked to read the State Bank of India'a compensation policy, I can understand. The bank can "lose" original title deeds of your dream home, your biggest investment, and in return will only have to pay "out of pocket expenses" for obtaining duplicate title deeds and a lump sum compensation of Rs. 5000. There are no guidelines from Reserve Bank of India in this regard. Consumer Courts, however, take a different view sometimes. (Read more below...) Link to full SBI Compensation policy:,453,661

In November 2012, New Delhi District Consumer Disputes Redressal Forum directed IDBI Bank to pay Rs 3.50 Lakh lakh as compensation to a home loan borrower for losing the title deeds of his flat. The forum also ordered IDBI to issue a certificate stating that it had received various documents pertaining to the borrower's flat at Pitampura in North Delhi but had lost the same later. The forum said that "the opposite party (IDBI Bank) was negligent in taking proper care of the documents. Once it was aware of the nature of documents of title, it should have sent it to its own office in Bombay by a official messenger or an officer personally rather than through a courier. It had to exercise the same prudence and care as it would do in case of its own property in handling such documents. The case discloses utter deficiency on its part resulting in incalculable loss to the complainant (borrower)". The Forum also directed IDBI Bank to get the lost documents reissued and duly certified by the DDA and the cooperative group housing society and to take all necessary steps to safeguard the borrower's interests. The forum's order came on the plea of Delhi resident Mr. Narinder Kainth, who had alleged that IDBI Bank had lost the title documents from its custody. IDBI Bank while admitting that the documents were lost, had contended that loss of documents was not intentional and they were lost by the courier company in transit. The forum, however, rejected the bank's contention saying the Forum cannot split liability between the bank and the courier service and directed the bank to pay compensation of Rs. Three Lakh for harassment and Rs 50,000 as litigation expenses.

I am still worried for all the home loan borrowers in India.

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All information given in this blog is obtained from sources in the public domain, RTI applications, discussions with bankers, bank customers in India and also with some employees of Reserve Bank of India having knowledge of the working of various Offices of Banking Ombudsman in India. All information in this blog is presented on a best effort basis and is not claimed to be complete information on any of the subjects covered in this blog. Use of any information given in this blog is purely voluntary on the part of the readers. Author of this blog does not assume any responsibility for any action of the readers related to any matter discussed in this blog or any consequences thereof. Readers of this blog are advised to consult a legal practitioner before taking any action related to any matter discussed in this blog.