The topic of discussion herein makes sense after the recent stir on a news piece that suggested that accepting personal loans would be banned under the banning of unregulated deposit schemes ordinance, 2019. And so, we will understand its likely implication on the personal loans which are taken from relatives as well as friends to meet some financial challenges.
And as per the provisions of the ordinance, deposits also include personal loans. And under the ordinance it is not the deposits that are banned or restricted but unregulated deposit schemes that are tendered to the people to make unreasonable gains and dupe the masses.
So, while there is no ban on personal loans which we often to tend to look forth from friends and relatives, there are still some considerations which need to be taken care of. Here are mentioned some such conditions:
1.Loan over Rs. 20,000 cannot be taken in cash:
First and foremost, the loan over Rs. 20,000 cannot be taken in cash and the amount has to be secured either via bank demand draft or account payee cheque. Also, if there is a balance of loan and additional borrowing that exceeds this benchmark limit, the loan borrowing cannot be made in cash. Say for example: If you have already borrowed Rs. 15000 by way of electronic transfer or cheque and again intend to borrow a sum of Rs. 10,000 in cash, you cannot go for it as the balance exceeds the sum of Rs. 20,000. And in a case when the balance of the outstanding loan amount is already over Rs. 20,000, you cannot accept any more amount in cash.
2.Repayment of Loan comes with restriction too:
Also when it comes to repayment of loan or deposit, there is placed a restriction that whether the repayment in full or partial can be made via bearer cheque or cash, if the balance of the deposit or loan exceeds Rs. 20,000. What is more interesting here is that repayment by the bank also has to follow a similar stance. And also, when there is violation of the said norm even by the bank, there shall be penalty implications, nonetheless the same has to be borne by the individual borrower.
3. Restrictions of lending between Resident and NRI:
Here are also restrictions put forth by the exchange control laws on the loan conditions when it comes to lending between resident and non-resident Indian. Non-resident Indian can only offer rupee loan to a resident and that too for a maximum period of 3% and interest rate of 2% over and above the bank rate.
Also, the NRI relative can seek a loan from the resident individual in rupee currency but that has to be interest free for a minimum term of one year and the amount of loan cannot exceed certain limit, among other restrictions.
And a foreign currency loan can be sought from the NRI who is a close relative and not from other NRIs, subject to such other conditions and restrictions. Here in also there is a cap on the maximum amount of loan that can be taken in foreign currency from close NRI relative of $250,000.
4. Borrower's duty:
So, knowing of such limitations in personal loan borrowing is as essential as when considering to borrow for business purpose. Also, without saying, business related dealings have far more limitations Hence, remember to go by the law as when you against them, there are penalty implications which depend on case to case basis.