In 2004, 45-year-old Sandip Shah, a businessman from Surat, took a home loan of Rs 500,000 from the Athwalines branch of Bank of Baroda in the name of his wife, Priti S. Shah, to pay for their flat in Surat.
The bank, as is routine in such cases, took possession of the title deed. It was to be returned when the loan got cleared.
In the 2006 floods in Surat, about 800 documents like Shah's in the BoB branch remained under water for four days and got damaged.
To get a loan from a bank, you will have to hand over some valuable document to it as a collateral, just like Shah did. It could be the title deed of your house, life insurance policies, proof of ownership of shares or mutual fund units, among others.
"It is only in the case of cars that the main ownership document, the registration certificate, is given to the owner since he is required to keep it with the car," says V.R. Gujarathi, deputy road transport officer, Mumbai. But the RC is retained by banks for auto-rickshaws and taxis.
The value of the loan you get is likely to be less than the value of the collateral. So, it is in your interest to get the papers back in good condition. The documents are at risk not only from natural calamities like earthquakes and floods, but also vermins, damp and seepage.
Arun Saxena, lawyer and president of International Consumer Rights Protection Council, says that one has to make a complaint in a consumer court within two years of the mishap to get compensation. According to an RBI spokesperson, there is no law governing the safety of documents; the apex bank can only advise the banks, but cannot give any form of compensation.
Some banks have outsourced document storage to specialists. "We have advised all our storage vendors this year to keep the documents at least 12-25 ft above ground. This exercise has been completed before the monsoons," says R. Muralidharan, general manager, ICICI Bank, Mumbai.
"After the 2005 floods in the city, we have been identifying all flood prone areas and shifting document bases from there." He adds that after that deluge, the bank paid compensation to get the originals replaced.
But Shah's bank is yet to do that. "The bank has not told anyone officially about the damage to documents. Those who approach the bank two years after the flood will find it much more difficult to get compensation," he says.
Stamp duty will have to be paid afresh to get duplicate documents made. BoB says it will help the affected parties get the documents made again, but it has given no clear indication about paying the stamp duty.
"We cannot comment on that before quantifying the claim amount," says Swati Marathi, a senior manager of BoB in Surat.
BoB's solution does not suit Shah. "Will you consider buying a house if the documents are duplicate?" he argues. He wants BoB to replace the document since it was damaged while in its custody. He is now approaching the courts to get that done.
Precautions at your end. In the final analysis, you have to trust your bank to keep the documents safe. General insurance companies and insurance experts say there is no policy for insuring the papers.
There is almost nothing you can do to ensure the safety of your documents. However, to at least prove that they existed, photocopy your contracts, transaction papers and all the documents you submit to it. Get all the photocopied documents attested, preferably by a notary. If possible, check the bank's storage facilities before signing the loan papers.
After all, prevention is better than cure.