Category: Contracting SDK

Reserve Bank of India (RBI), on 15th April 2024, announced the new guidelines for Key facts statement (KFS) for retail and MSME terms loans and advances, containing essential information such as the all-inclusive APR and recovery and grievance redress mechanisms.

These guidelines are mandatory to ensure enhanced transparency in lending and enable customers to make informed decisions, thereby empowering borrowers to make informed financial decisions.

To whom are these changes intended?

• • All Commercial Banks
    • Local Area Banks,
    • Small Finance Banks, 
    • Regional Rural Banks, 
    • excluding Payments Banks
  • All Co-operative Banks
  • All NBFCs
    • Housing Finance Companies (HFC)
    • Microfinance institutions (MFI)

   

Here’s a quick checklist for your perusal

I am a bank and we use KFS for credit cards as well. Do these guidelines apply to credit card products as well?

No – these changes are only for “Retail and MSME term loans.” However, with implied regulations and the changing lending landscape, we prefer to look for new guidelines from the RBI.

“Credit card products and corporate loans” are not included in the recent KFS guidelines shared by RBI.

What are the changes mandated by RBI?

1. “The new KFS statement should be in a standardized format with an added APR and Amortization sheet.”

As per Annex A, provided by RBI

The KFS annex A has ensured transparency by providing the exact format in 2 parts:

Part 1: Interest rate and fees/charges

• Loan proposal/account No.
• Type of Loan
• Sanctioned Loan amount (in Rupees)
• Disbursal schedule (including stages and related clauses if not disbursed 100% upfront)
• Loan term (specified in years, months, or days)
• Installment details (type, number, amount of EPIs, and commencement of repayment)
• Interest rate (percentage and type: fixed, floating, or hybrid)some text
• Additional floating rate information: Reference Benchmark, Benchmark rate, Spread, Final rate, Reset periodicity, Impact of benchmark change on EPI, and number of EPIs
• Fees/Charges (payable to the RE, payable to a third party through RE, including specifics like processing fees, and insurance charges)
• Annual Percentage Rate (APR) (expressed as a percentage)
• Details of Contingent Charges (penal, foreclosure, switching charges, etc.)

Part 2: Other qualitative information

• Clause of Loan agreement relating to engagement of recovery agents
• Clause detailing grievance redressal mechanism
• Contact details of the nodal grievance redressal officer (phone number and email)
• Information on potential transfer of the loan to other REs or its securitization
• Details related to collaborative lending arrangements: Names and proportions of funding by the originating and partner REs, blended interest rate
• Specific disclosures for digital loans: some text
  • Cooling off/look-up period
  • Details of the LSP acting as a recovery agent

KFS annex B has illustrated the computation of ARP for retail and MSME term loans:

KSF annex C has illustrated the repayment schedule under equated periodic installment (EPI) for the hypothetical loan.

2. “The KFS should be written in standard language for borrowers to understand.

It has been mandated by RBI that the content of KFS should be explained to the borrower and the KFS shared with the borrower should be in the language understood by the borrower.  

Since most of the borrowers don’t speak only English or Hindi, as a best practice, the KFS and loan agreement should be in a language understood by the borrower and the loan execution journey for eSign should also be in the same language.

3. Lenders should help borrowers understand KFS before loan execution.

It has been mandated by RBI to allow borrowers to review the entire KFS before signing.

In physical flow, the KFS should be shown and reviewed by the borrower.

In digital flow, during the loan execution journey, the KFS shall be reviewed by the borrower who could accept or reject it.

4. Loans with tenure >7 days -> The KFS validity will be 3 working days.
Loans with tenure <7 days -> The KFS validity will be 1 working day.

Simply put,

For loan tenure => 7 days or more, the lender has to provide at least 3 or more working days for the borrower to review and sign the KFS

For loan tenure <= 7 days, the lender has to provide at least 1 working day for the borrower to review and sign the KFS

Note: The validity period will start from the day KFS is provided to the borrower. It is a minimum timeframe in which the borrower is entitled to either accept or reject the KFS.

There are two approaches by which lenders can share the KFS document with the borrower:

1. Approach 1: It suggests that the KFS shall be sent to the borrower first – To review, acknowledge, and eSigned. Afterward, the loan agreement shall be sent to the borrower – To review, acknowledge, and eSigned.The KFS and loan agreement will not be part of the same loan kit.Note: The validity period as stated above is only for KFS. The lenders can choose loan agreement expiry as per their internal regulations.
2. Approach 2: It suggests that the KFS and loan agreement shall be sent to the borrower as part of the same loan kit – To review, acknowledge, and eSigned.

Note: The validity period as stated above is now for the entire contract. 

Note: Lenders can also upload scanned copies of KFS and loan agreements and share them with borrowers for signing.

5. The borrower should consent and acknowledge the agreement before signing.

In the digital KFS flow, there are multiple ways you can get consent and acknowledgment:

In the digital KFS flow, there are multiple ways you can get consent and acknowledgment:

• Aadhaar eSign (OTP, FaceAuth, Fingerprint, Iris)
• Smart eSign (Draw signature, upload, select auto-generated signature)
• Clickwrap (Based on your legal/compliance need)

All these methods are valid by IT Act, 2000 for collecting eSigns from the borrower.

For high-stakes loans where legal enforceability is crucial, you can often prefer robust authentication methods such as Aadhaar eSign.

For lower-risk loans where regulatory compliance is the primary concern, simpler electronic verification methods such as Smart eSign or clickwrap can be opted for.

6. Without the borrower’s explicit consent, lenders cannot charge any fees not mentioned in KFS, ensuring fair practice.

Simply put, if you wish to levy any additional charges that are not mentioned in the KFS document, you will need to have the explicit consent of the borrower.

In all cases wherever the RE is involved in recovering such charges, the receipts and related documents shall be provided to the borrower for each payment, within a reasonable time.

7. Updating loan terms requires consent from both the lender and the borrower.

When modifying loan agreements, it’s essential to follow proper contractual procedures, the process involves creating a new KFS and loan agreement that accurately reflects the proposed changes.

These documents should be presented to the borrower for review and approval.

The borrower’s explicit consent is crucial in this process. It’s important to note that lenders cannot force borrowers to accept new terms.

The borrower has the right to decline any proposed modifications to the original agreement.

In scenarios where a borrower refuses the new terms, lenders must respect this decision. It’s not permissible for the lending institution to unilaterally terminate the loan based solely on the borrower’s rejection of proposed changes.

The original terms of the loan agreement should remain in effect unless both parties agree to modifications.

How to comply with KFS’s new regulations using Contract360

1. Template Engine: You can easily create pre-build templates where data can be pre-populated as per borrowers’ details and can be easily sent to borrowers for eSign.
   
2. Setting up the KFS flow – You can easily set up both of the flows where KFS can be sent separately or together as a KFS loan kit, for borrower to eSign. 
3. Selecting borrower-preferred language – You can easily build a template and eSigning journey in borrower-preferred language from 13+ local language support for a personalized borrower experience.
   
4. KFS Consent and acknowledgment – Borrower can easily review the KFS, simply accept the KFS by acknowledging via eSign, or reject if any discrepancies are found. 
   
5. Validity period – You can easily set custom expiry links for borrowers to eSign the agreement.
   

Using Contract360, you can easily comply with all new KFS regulations within a week.

Contact us to schedule an expert call on how Contract360 can help you comply!

FAQ

Q. What would happen if I’m unable to comply with new KFS regulations?

A. RBI rolled out strict guidelines with a deadline of 1st October 2024.

Incase of non-compliance, RBI can charge a hefty fine or penalty. The new guidelines are mandatory for Banks, Co-op banks, SFB, NBCF, HFC, and MFI.

Using the Contract360, you can seamlessly comply with new KFS rule and be complaint in 1 week.

Get on an expert call

Q. KFS needs to be in a language understood by the borrower. I don’t have the bandwidth to change the language fluency for the borrower.

A. Contract360 provides support to convert your existing KFS into 13+ local languages. With Contract360, you can select the borrower-preferred language to complete the loan execution journey.

With dedicated ESP like eMudhra, you can easily change the consent text in 10+ different vernacular languages as well, providing an end-to-end personalized experience. 

Q. What loans are covered in new KFS regulations that I need to comply with?

A. New KFS regulations suggest all loans including:

1. Retail Lending by all REs 
2. Term loans to MSMEs by all REs
3. Loans by SCBs to individual borrowers 
4. Digital lending by any regulated entity
5. Microfinance loans whether by MFIs or other REs

Loan excludes

1. Credit card debt
2. Corporate loans

Q. What exactly comprises of retail loan?

A. Retail loans may include all types of loans to individuals, including the following :

1. Vehicles/Auto loans 
2. Educational loans
3. Home Loans
4. Loan against shares
5. Loan against property
6. Loan against fixed deposit, etc.

The retail loan does not include:

1. Business loans
2. Lines of credit – as the circular specifically refers to term loans
3. Loans to corporates (other than MSMEs)
4. Dealer financing (other than individuals)
5. Builder Finance (other than individuals)

Q. Is it applicable to an LSP displaying loan information?

A. If LSP is acting on behalf of the lender, and the authority of the lender, what applies to the lender applies to the LSP as well. 

If LSP only has a platform that aggregates lenders and borrowers and provides a digital interface, they are not obliged to adhere to these new guidelines. However, we recommend you know about new regulations if needed to comply in the future.

Q. What are the differences between MITC and KFS?
I’m an HFC, do I need to comply with both?

A. MITC is Most Important Terms and Conditions and KFS is Key Facts Statements. The format of KFS is more focused on interest rates and other charges as well as a few qualitative terms of the loan, whereas MITC provides several other relevant details.

However, there are no new rules for MITC but lenders should prepare MITC as well as KFS in case of home loans.

Q. I am an LSP or digital lending platform. Will I be issuing the new KFS?

A. KFS should be issued by the lender and not the LSP/DL platform.

KFS needs to be reviewed and acknowledged by the borrower by a link sent via verified email ID/SMS/ Whatsapp

In the case of co-lending KFS is issued on behalf of joint lenders 

The stamp, once a ubiquitous symbol of officialdom, is facing a modern challenge: the rise of eStamping. This digital revolution in document authentication offers convenience and security in stark contrast to the traditional methods of physically procuring and affixing stamps. But is eStamping truly the vanguard, or does the old guard of paper and ink still hold its ground? Let’s delve into a comparative analysis, weighing the pros and cons of each approach.

Traditional Stamping Methods

For centuries, physical stamps have been the trusted guardians of document integrity. Their tangible presence, with embossed seals and watermarks, offered a sense of security and tamper-proof validation. The process is familiar: visit a stamp vendor, purchase the required denomination based on document value, and meticulously affix the stamp. While this method is deeply ingrained in legal and financial systems, it comes with its own set of pros and cons.

Pros:

Tangible evidence: Physical stamps offer a tangible element, providing a sense of security and ease of verification for some users.

Accessibility: Traditional stamps are readily available in most locations. This makes them accessible even in areas with limited internet connectivity.

Familiarity: The method is well-understood by older generations accustomed to paper-based transactions.

Cons:

Time-consuming: Acquiring stamp paper, calculating stamp duty, and affixing stamps can be time-consuming, especially for complex documents.

Prone to errors: Manual calculations and affixing stamps leave room for human error, potentially invalidating documents.

Security concerns: Counterfeiting and forgery of physical stamps pose security risks, raising concerns about document authenticity.

Environmental impact: Paper production and transportation associated with physical stamps contribute to environmental degradation.

E-Stamping

eStamping, on the other hand, leverages the power of the internet to revolutionize document authentication. Instead of physical stamps, documents are electronically stamped through secure online platforms. The process involves selecting the required denomination, paying electronically, and downloading a digital stamp certificate. This certificate is then embedded within the document, ensuring its authenticity and validity.

Pros:

Convenience: eStamping can be done anytime, anywhere, from the comfort of one’s home or office.

Speed and efficiency: The process is significantly faster, generating eStamp certificates in minutes compared to the hours or days it can take with physical stamps.

Security: eStamp certificates are encrypted and tamper-proof, minimizing the risk of fraud and forgery.

Transparency and auditability: The entire eStamping process is digitally recorded and easily traceable, enhancing transparency and accountability.

Environmental benefits: eStamping eliminates the need for paper production and transportation, contributing to a more sustainable future.

Cons:

Digital dependence: Users require internet access and basic computer literacy to utilize eStamping platforms.

Initial learning curve: Familiarity with the eStamping process may require initial training or support, particularly for non-tech-savvy users.

Potential technical glitches: While rare, technical issues with eStamping platforms could temporarily disrupt document validation.

The adoption of eStamping is rapidly gaining momentum. In India, for instance, eStamping has witnessed a remarkable rise since its implementation in 2011. Statistics reveal that in 2022-23, over 85% of stamp duty collections were through eStamping, showcasing its growing popularity and efficiency.

Furthermore, the Indian government estimates that eStamping has saved over Rs. 10,000 crores in printing costs and revenue leakage since its inception. This translates to significant financial savings for the government and a more efficient allocation of resources.

The Path Forward

While eStamping offers undeniable advantages, it’s important to recognize that traditional stamping methods still hold value. For certain documents like wills and powers of attorney, physical stamps might be preferred for evidentiary purposes. Additionally, rural areas with limited internet connectivity might still rely on physical stamps for convenience.

Therefore, the future of document authentication likely lies in a hybrid approach. eStamping will undoubtedly become the dominant form for its efficiency and security benefits, but physical stamps might still play a role in specific cases.

Conclusion

The battle between eStamping and traditional methods is not a winner-take-all scenario. Both approaches offer unique advantages and cater to different needs. The key takeaway is that the digital revolution is transforming document authentication, and eStamping is leading the charge with its promise of convenience, security, and efficiency. Traditional stamping methods, though time-tested, need to adapt to the changing landscape to remain relevant and accessible. By striking a balance between the two, we can ensure that stamping remains a reliable and accessible component of modern life.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs, easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.
Contact us directly!

Two prominent methods for digital authentication in India are Digital Signature Certificate (DSC) Token Signing and Aadhaar eSign. According to data from the Controller of Certifying Authorities (CCA) in India, the issuance of Digital Signature Certificates (DSCs) has been steadily increasing over the years. In the fiscal year 2020-21, over 24 million DSCs were issued, reflecting the growing demand. Aadhaar eSign on the other hand, has experienced remarkable growth since its inception. More than 125 million Aadhaar eSign transactions were reported in the year 2020-21, according to the Unique Identification Authority of India (UIDAI). This statistic highlights the widespread use of Aadhaar-based authentication for various purposes. 

While both serve the common goal of validating electronic documents and transactions, they differ significantly in their technical underpinnings, functionalities, use cases, and regulatory frameworks. In this article, we will delve into the nuances of DSC Token Signing and Aadhaar eSign, highlighting their unique features and how they cater to diverse digital authentication needs.

Technical and Functional Differences

DSC Token Signing

DSC Token Signing relies on a Digital Signature Certificate issued by a Certifying Authority (CA) in compliance with the Indian Information Technology Act, 2000. This method uses a cryptographic key pair – a private key held by the signatory and a public key stored in the DSC. When the signatory wishes to sign a document digitally, they use their private key to create a unique digital signature. The recipient can verify the signature’s authenticity using the corresponding public key.

Aadhaar eSign

Aadhaar eSign, on the other hand, leverages the Aadhaar ecosystem, India’s unique identity system, for digital authentication. This method allows individuals to electronically sign documents using their Aadhaar number and biometric authentication (fingerprint or iris scan). The process involves sending a One-Time Password (OTP) to the registered mobile number linked to the Aadhaar, which is then used to sign the document.

Top Unique Features

DSC Token Signing:

High Level of Security: DSC Token Signing offers a robust security framework, making it ideal for critical and sensitive transactions. The private key used for signing is securely stored in a hardware token or smart card, adding an extra layer of protection.

Legal Validity: Documents signed using DSC Token Signing are legally recognized in India, ensuring their enforceability in courts of law. This feature is crucial in the context of legal contracts and financial transactions.

Aadhaar eSign:

Ease of Use: Aadhaar eSign is incredibly user-friendly, requiring only a mobile number and biometric authentication. This simplicity promotes its adoption among a diverse population, including those with limited technical expertise.

Widespread Accessibility: With over a billion Aadhaar numbers issued, Aadhaar eSign has the potential to reach a massive user base, making it suitable for applications that require broad public participation.

Use Cases

DSC Token Signing:

Banking and Financial Transactions: Many banks and financial institutions employ DSC Token Signing for secure online transactions, loan approvals, and investment-related processes.

SBI, one of India’s largest banks, has implemented DSC Token Signing for various purposes, including secure online transactions and document verification. By incorporating DSC Token Signing into their digital banking platform, SBI has been able to provide customers with a high level of security and confidence in their online banking transactions. This implementation has contributed to a significant reduction in fraud and unauthorized access to customer accounts.

Aadhaar eSign:

eKYC and Onboarding: Telecom companies, banks, and fintech firms utilize Aadhaar eSign for customer onboarding and eKYC processes, streamlining customer registration and identity verification.

HDFC Bank, one of India’s largest private sector banks, has integrated Aadhaar eSign into its customer onboarding and account activation processes. This implementation allows HDFC Bank to onboard customers swiftly by verifying their identities using Aadhaar-based eKYC. Customers can digitally sign account opening forms, making the process faster and more convenient.

Conclusion

In the fast-evolving landscape of digital authentication in India, the implementation of DSC Token Signing and Aadhaar eSign by banks and financial institutions has made significant strides in enhancing security, efficiency, and accessibility in financial transactions. These methods cater to diverse needs, from secure document signing to streamlined customer onboarding.

As technology continues to advance, organizations must stay abreast of the latest authentication solutions to meet the ever-growing demands of their customers. One such solution worth exploring is Signzy’s Aadhaar E-Sign API.

Signzy’s Aadhaar E-Sign offers a robust and user-friendly platform for implementing Aadhaar-based electronic signatures. With Signzy’s technology, banks and financial institutions can simplify customer onboarding, streamline document verification, and ensure compliance with regulatory requirements. This API empowers organizations to exploit the full potential of Aadhaar eSign for a seamless and secure digital experience.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs, easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.
Contact us directly!

In an increasingly digital world, the verification of documents and certificates has transitioned from traditional methods to online platforms. One such document that has undergone this transformation is the e-Stamp certificate. E-Stamp certificates are digital documents issued by authorized authorities to represent the payment of stamp duty. These certificates contain electronically signed information, including the unique identification number (UIN), date of issuance, stamp duty value, document type, and other relevant details. Verifying the authenticity of these certificates ensures that the stamp duty has been paid correctly and the document is legally valid.

In this article, we will provide a step-by-step guide to verifying e-Stamp certificates online, and offer practical insights and tips for individuals and businesses to navigate this process efficiently. Let’s get started.

A step-by-step guide to verifying e-Stamp certificates online

Step 1: Identify the State

The first step involves identifying the state where the e-Stamp certificate was issued. Different states in India have different e-stamping websites and verification procedures. Some common e-Stamping websites include:

• Stock Holding Corporation of India Limited (SHCIL): https://www.stockholding.com/
• eGRAS (e-Governance for Registration and Administration of Stamps): https://egrashry.nic.in/
• V-Stamp: https://www.empirephilatelists.com/stamp-gradings

Step 2: Locate the Verification Section

Once you are on the e-Stamp certificate verification portal, locate the section or tab dedicated to e-Stamp certificate verification. It is usually prominently displayed on the homepage or listed in the main menu for easy access.

Step 3: Enter the Certificate Details

The specific details required for verification may vary slightly between different states. However, some common information you will need to enter includes:

• State: Select the state where the e-Stamp certificate was issued.
• Certificate Number (UIN): This is the unique identification number printed on the e-Stamp certificate.
• Stamp Duty Type: Select the type of document for which the e-Stamp was used.
• Certificate Issue Date: Enter the date on which the e-Stamp certificate was issued.
• Verification Code: Some websites may require you to enter a verification code displayed on the screen.

Make sure you enter these details accurately to avoid any discrepancies during the verification process.

Step 4: Submit the Request

After entering the required certificate details, click on the “Submit” or “Verify” button, depending on the terminology used on the portal. This action will initiate the verification process.

Step 5: Review the Verification Result

The website will display the verification results, indicating whether the e-Stamp certificate is valid or not.  The results typically include information like the UIN, stamp duty value, document type, and the issuing authority. 

Tips and Insights for Efficient E-Stamp Certificate Verification:

• Make sure you enter the certificate details accurately. Even minor errors in the certificate number or other information can lead to verification issues.
• Download the e-Stamping mobile app. Many e-stamping authorities offer mobile apps that facilitate convenient certificate verification on the go.
• It’s advisable to keep a record of the verified e-Stamp certificates for future reference. This can be especially useful for businesses and individuals who frequently deal with e-stamping.
• Don’t delay the verification process. It’s essential to verify e-Stamp certificates promptly to ensure their authenticity before proceeding with any legal or financial transactions.
• If you encounter any issues during the verification process or if a certificate is not verified, don’t hesitate to reach out to the customer support provided on the portal or the relevant government authority for assistance.

Verifying e-Stamp certificates online is a crucial step to ensure their authenticity and prevent fraud. By following the step-by-step guide provided in this article and adhering to the practical insights and tips, individuals and businesses can navigate the e-Stamp certificate verification process efficiently. As the use of e-stamping continues to grow, understanding and practicing these verification procedures becomes increasingly important for ensuring secure and transparent transactions.

One such reliable solution is Signy’s E-Stamping. This API plays a crucial role in simplifying and enhancing the e-stamping process. Signy’s E-Stamping API offers an innovative and user-friendly platform for e-Stamping, making it easier than ever to ensure the authenticity of your certificates. By incorporating Signy’s advanced technology into your e-stamping workflow, you can streamline the verification process, reduce the risk of errors, and promote secure transactions.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs, easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.
Contact us directly!