Trust is a word we associate with banks. But Stanley Nadar may beg to differ, because his experience with UCO Bank has been different. When he went to collect his original documents from the bank (of course, after all the dues on the loan were paid for), bank staff told him that they had misplaced one of his documents.
See below, where they mention that the Agreement for Sale was taken as security which was taken while sanctioning the loan was not found on records, seems to be misplaced. "I have been after the bank for more than around six months now. And, finally after running from pillar to post a manager gave me a letter dated 30.05.2012 stating that the document is misplaced by the bank, and we will try some alternative in going to the sub-registrar to get a duplicate certified copy," said Nadar.
Why they are lost: If you think this is a one-off, think again. A simple search on various online consumer forums will show that banks carelessly losing document is almost an endemic issue. A PTI report on 21 November said IDBI Bank was directed by a consumer forum to pay a compensation to a home loan borrower for losing the title deeds of his flat. Banks in the past have lost customers' important documents due to sheer carelessness.
At times, it could be due to an accident. On 23 July 2010, Times of India reported of an incident where fire destroyed records stored at State Bank of India branch in Ludhiana. In 2005, the Mumbai floods destroyed or damaged thousands of documents of customers who had entrusted their documents to banks. Same was repeated in Gujarat floods in 2006.
What documents: There are number of documents we submit to our banks, be it mutual funds documents, public provident funds documents, loan documents. We give them both duplicated documents as well as original documents (mostly in home loan, and loan against property you submit original property documents) and the like. Even when you take loans against assets, you have to submit the original Kisan Vikas Patra (KVP), National Saving Certificate (NSC), Fixed Deposits (FD) and insurance policy documents to the bank.
Their mistake, your headache: If your bank loses your KYC/NSC, getting them from the post office will be like climbing the Mount Everest. Selling property with missing or damaged original documents is an extremely difficult task. Zarir Engineer, Mumbai based realator, Corner Stone Properties, said, "We recently faced such an issue. Where LIC Housing Finance lost the client's original property papers.
Getting a duplicate for the registrar office was an hassle." Let's be honest, getting buyers for property that does not have original documents is not easy. "Would a bank give a loan based on duplicate documents? Would you buy a property from an owner if he does not give you original documents citing, bank lost them?" asked Nadar. For somebody looking to switch the home loan, the troubles will simply compound.
The new lender is unlikely to be keen to offer you the deal. Instances have been known where banks have not lost original documents. But when the documents have been returned, they were damaged and not in readable conditions. And in such cases, banks have been quick to cite natural disasters.
That's about original documents; even photocopies may not be safe with banks. Again online consumer complaints forums are full of complaints where even after doing all the paperwork and proving the photocopies, banks have asked for photocopies again, simply because they have misplaced the documents.
What banks say: We spoke to one state-run bank and another one from the private sector. Banks now have special strong rooms where they store documents. Such storage rooms are no longer located in basements (to avoid destruction of documents due to floods) and store of higher floors of the building. A public sector banker we spoke to said, "Unlike a few banks, we do not transport customers' documents to a central location, but have regional storage centre pan India." Strong rooms and non-basement storage places could help against floods and fire.
But, if documents are misplaced without any logical reason? Banks don't insure your documents in their custody. In such a case, as consumer don't have much of an option.
Compensation: Technically, once the loan is repaid,banks should return the documents they have taken. Narayanan Raja, CEO, Banking Codes and Standards Board of India, said, "As per our code, banks are to return all securities, documents, title deeds within 15 days of the payment of all dues agreed to." In fact, as per the code which banks have agreed upon: We will compensate you for any delay in return of securities/ documents/ title deeds to mortgaged property beyond 15 days of the repayment of all dues agreed to or contracted."
The IDBI customers mentioned above is to get Rs 3.5 lakh as compensation from the bank for losing his title deed. As per, the RBI Banking Ombudsman (BO) Annual report:
A complainant approached the BO alleging that the bank was not returning original title deed kept as a security for housing loan availed, even though the loan had been fully paid.
The bank replied that they were not able to trace the documents and had arranged for a certified copy of the documents and handed over the same to the complainant. The BO observed that loosing of original Title Deed was a serious lapse and the certified copies can never substitute the originals. The bank was directed to pay compensation of Rs 25,000 to the complainant for deficiency in service.
What can you do: The truth is that banking customers would rather have their original documents back, instead of getting compensated for their loss. But, as a customer, you really can't do much. Engineer says, "Best is to keep a set of photocopies of all the documents you submit to the bank with you as well." Ideally, get these photocopies attested as well. You could also get these documents scanned and stored electronically.
And, as the old age adage goes, "Trust God, but lock your car." Likewise, trust your bank, but keep those photocopies with yourself as well.