According to the RBI, microcredit has a social purpose and borrowers who take out microloans do not have the type of collateral demanded by lenders. Hence, from now on, all microfinance companies will have to give loan guarantees for free as do non-bank finance companies registered with the RBI.

Question: My friends in India who are running small businesses are facing problems from companies lending money to them because collateral and collateral is required. These companies are not regulated by the Reserve Bank. Is there a movement to streamline unsecured lending measures?

Reply: Current regulations for providing credit to low-income families only apply to non-bank financial corporations registered with the Reserve Bank of India. Other lenders who hold around 70 percent of the microfinance space are not subject to any regulatory conditions. As a result, these lenders currently require collateral for making loans, which causes a lot of difficulty for small borrowers. The Reserve Bank therefore proposed to extend the unsecured nature of microfinance loans to all lenders and not just to non-bank financial corporations and registered microfinance institutions. According to the RBI, microcredit has a social purpose and borrowers who take out microloans do not have the type of collateral demanded by lenders. Hence, from now on, all microfinance companies will have to give loan guarantees for free as do non-bank finance companies registered with the RBI.

My family members conduct online foreign currency transactions to purchase various goods and services. Remittances are also carried out in accordance with the law. However, I am told that there are a lot of hidden charges in the form of currency markup by banks. Similar problems arise when NRIs send remittances to India for their family members. Is it true?

Research by an independent agency estimated the value of foreign exchange transaction fees at Rs 121.42 billion in 2019. These fees included a foreign exchange mark-up of Rs 44.22 billion. The study was published by a tech company founded with the aim of reducing the costs of cross-border remittances. Likewise, NRIs that send money to India also incur a huge cost built into the transaction fees which come in the form of an exchange markup. It is estimated that the money lost on exchange margins has risen from Rs42 billion to Rs79 billion over the past year. While technology and the Internet have solved the problems of sending remittances and made quick transfers more convenient, the concealment of fees in the exchange rate results in a decrease in the money received by the final recipients of the funds in India.

A cousin had an accident and had to incur medical expenses. He had previously taken out an individual accident insurance policy, but it had lapsed a few weeks before the accident because he had not paid the renewal premium when due. The insurance company therefore refused to pay him any amount under the policy. Is the company justified in doing so?

The Supreme Court of India in a recent judgment upheld the action of an insurance company not to pay any amount when the policy lapsed due to non-payment of the premium on the due date. deadline. The court ruled that the conditions of an insurance policy must be strictly observed and that no amount can be paid in the event of an accident if the policy lapses due to non-payment of the premium on the date of maturity. In this case, the person had paid the premium after the accident. Despite this fact, the Supreme Court ruled that the default on payment on the due date cannot be tolerated and that the insurance company was therefore not required to pay an amount under the accident insurance policy. . This decision must be kept in mind because any delay in the payment of the renewal premium would result in the absence of benefits if an accident occurs after the contract has terminated.

HP Ranina is a practicing lawyer specializing in tax laws and foreign exchange management in India.