Aggarwal_IT (Manager) 07 December 2012

Legal procedure to lend money

Hi,

I am a US based NRI and looking to start an IT professional training related business with a person in Bangalore. The person in India needs a 2 Lakhs loan from me for 2 months for this business.

I am not a professional lender and the person whom I am looking to lend money is NOT my friend or relative. I found his contact on an internet website and have been speaking with him for around 4 to 5 months over phone and e-mail. Although, I have the feeling that this person is genuine, I have NEVER met him in person.

1. Can I legally lend money to him, given I am not a professional lender and the person I am looking to lend is NOT a friend?

2. It has been advised on this legal forum to lend money by check instead of lending money in cash.

If I lend money by online money transfer from my bank account to his bank account, would it be same as lending money by check?

3. He is wiling to give me interest for this loan. One of the discussion forums mentioned that a few states have made rules on the max. rate of interest to be charged even by private parties. Since the borrower is based in Karnataka, what is the max. rate rule for Karnataka (if any)?

4. Can you send a template for the promissory note? Since I am not in India right now, I have to rely on him to make the promissory note. What is the process to execute a promissory note and can it be done without my physical presence? How can I verify whether the promissory note prepared by him is genuine?

5. One of the discussion forums suggested to ask borrower for an undated check as an additional security. The borrower has offered to give me a post dated check. Would the post dated check be as good as an undated check, or would there be an added benefit of an undated check over a post dated check?

Best Regards!

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4 Replies

adv. rajeev ( rajoo ) (practicing advocate) 07 December 2012

If you lend the money without money lending license amounts to illegal money lending business. You cannot claim interested. If you want to lend him a money you can pay it as hand loan wihich does not bears interest. To know more about security for your money you can contact your advocate or call em.

shiv (AGM) 07 December 2012

Dear sir,

In case you want to help in the business of some known person , you can do so by enetering into an memo of understanding and execution of promissorry note and same shall be excuted before sub registrar of concerned area.

2. in case u are NRI u can execute one power of attorney to one advocate or known person who shall execute your transaction...but payment is to be returned by equated instalments and you can take filled cheques of the person concerned with a view to secure payment.

My mobile no. 08655444181 for further assistance

harish (Advocate) 07 December 2012

Never lend money to an unknown person in life, what do you know about the hidden status of a person who takes you in confidence, takes/borrows money against a post dated cheque and suppose he is unable to return or refuses to return the there will be a litigation in courts which would cost you more that what you have lend, wasteful time, money and energy would cause lots of hardships and the litigation would go for years together do.......................nt

Madhu ojha (Orthopedic surgeon) 29 December 2012

IF U want to lend money to unknown in India, be mentally prepared to consider that u have thown away the money in garbage bin There are plenty of litigations in all courts of India for disputes in recovery of lent money So Lend and Forget that amount is the only way OR Dont Lend at all