• Online agreements and transactions

Dear sir

we are coming up with providing online financial services mainly personal loans and have few queries regarding this listed below.

1. As we plan to do most of the work online, can we take the agreements online itself instead of getting the customers signature on the hard copy. Eg : like there would be an option of " I Agree " for terms & conditions & privacy policy ...." , If customer clicks the button, it should be legal binding. How legally viable is this.

If not, is there any other option, where we can take agreements without customer Signing the hard copy.

2. As we act as an intermediary between Borrowers and NBFC, how can we we handle payments and receipts on behalf of NBFC in order to keep a track on borrowers monthly payments details.

3. Since NBFC is Governed by RBI ACT, does it require any local state approvals ( eg: money lending).
Asked 8 months ago in Business Law from Bangalore, Karnataka
Religion: None
1. The agreement should be digitally signed by the borrower. Mere click on ''I accept' is likely to make things difficult for you in the court.

2. The payment gateway is to be one which is approved by RBI. The details of customers are to be held in trust due to the fiduciary nature of relationship.

3. NBFC does not require a money lending license.
Ashish Davessar
Advocate, Jaipur
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448 Consultations
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prepare a standard form of agreement and put it online for acceptance of opposite party. It is valid in law. 

Either get power of attorney from NBFC or make an agreement of agency with NBFC. 

Only RBI is authorised to give licence for NBFC.
Shivendra Pratap Singh
Advocate, Lucknow
2752 Answers
41 Consultations
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Hi 
Answers to your queries. 
a)Option of " I Agree " for terms & conditions & privacy policy ...." , If customer clicks the button, Whether it is Legally Binding ? : It is legally binding. The Indian courts have taken a view that technology permits one to demonstrably show and prove at any later point that a person had indeed agreed to a set of terms by clicking on the 'I agree' button. Also since in India consent is not required to be given in any specific form, such manner of giving consent, i.e., by clicking on an 'I Agree' tab, has been construed by courts to be valid consent.
Click-wrap agreements. Click-wrap agreements are those whereby a party after going through the terms and conditions provided in the website or program has to typically indicate his assent to the same, by way of clicking on an "I Agree" icon or decline the same by clicking "I Disagree". The Indian courts have taken a view that technology permits one to demonstrably show and prove at any later point that a person had indeed agreed to a set of terms by clicking on the 'I agree' button. Also since in India consent is not required to be given in any specific form, such manner of giving consent, i.e., by clicking on an 'I Agree' tab, has been construed by courts to be valid consent.
2. Intermediary between Borrowers and NBFC- Handling payments and Receipts:  You should have an agreement or license from the NBFC as Business correspondent. NBFC's have their own guidelines for Business correspondent empanelment (Pvt Ltd Co's, societies, Registered Firms,Retired Insurance / Ex-service men etc) . If you are an Authorised BC, you can handle payments and receipts on behalf of NBFC's. 
3. Money lending is a state Act. You will need to have money lending license under state act, even if you are remotely connected to Direct Lending. 

I presume, you are not talking about Peer to Peer lending. For your information, Peer to Peer lending is not regulated but soon to be regulated by RBI (RBI is planning to issue a concept note by April 30)

Hope this helps. 
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
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1) online consent of borrower is legally binding . 

2) the borrower has accepted the terms and conditions of the contract . 

3) The Gujarat High Court passed a ruling to the effect that the States’ control on money
lenders amounts to an overlap with the regulation of NBFCs by the RBI and therefore,
regulated NBFCs are not covered by state money lending laws
Ajay Sethi
Advocate, Mumbai
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1219 Consultations
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1. As we plan to do most of the work online, can we take the agreements online itself instead of getting the customers signature on the hard copy. Eg : like there would be an option of " I Agree " for terms & conditions & privacy policy ...." , If customer clicks the button, it should be legal binding. How legally viable is this.

Such agreements shall be effective for the online business not involving financial services/transactions.  
If the T & C are violated in general matters legal action can be taken and the service may be terminated abruptly quoting the violations as reason.
Whereas in money transaction how can you recover the loan if he denies his signature or claims innocence of the knowledge of pressing or clicking  the button.  The customer cannot be made liable and it will be hard to prove the same since this technical issue which can be handled by more people without the knowledge of one another.  






If not, is there any other option, where we can take agreements without customer Signing the hard copy.

Any financial transaction with the customer's signature in the relevant papers or documents cannot be held legally valid.





2. As we act as an intermediary between Borrowers and NBFC, how can we we handle payments and receipts on behalf of NBFC in order to keep a track on borrowers monthly payments details.

This modality should have been arranged even before accepting the contract from the NBFC for recovering or transacting with the customers. 
If you are responsible for all the money involved between the NBFC and the customer, you should make proper records for each and every transaction and secure them with backup facilities so that the charges of embezzlement or misappropriation may not arise at a later stage followed by police action etc.







3. Since NBFC is Governed by RBI ACT, does it require any local state approvals ( eg: money lending).

All the NBFCs are governed by RBI act only.
The BFC has to obtain money lending licence and registration of the company.  
It should comply with the other requirements as per the provision of shops and establishment act. 

T Kalaiselvan
Advocate, Vellore
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If your business involves lending money, then you must register under the karnataka money lenders act compulsorily.
You must have an agreement between such NBFC's to handle payments and issue receipts to borrowers, otherwise it is illegal to do so. NBFC's will also not allow you to access the borrowers monthly payment details if you do not have an agreement with such NBFC's.
Kiran N. Murthy
Advocate, Bangalore
765 Answers
50 Consultations
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