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NBFCs flout norms, dent income
The Non-Banking Financial Companies (NBFCs) notorious for bullying tactics including sending bouncers to residences of defaulting customers are causing a dent in the income of the state exchequer while giving loans to buy two and four wheelers.
Financial institutions are not paying 0.5 per cent stamp duty on Loan-cum-Hypothecated Agreements of vehicle loans to the government
Hyderabad: The Non-Banking Financial Companies (NBFCs) notorious for bullying tactics including sending bouncers to residences of defaulting customers are causing a dent in the income of the state exchequer while giving loans to buy two and four wheelers.
The inspections carried out by the Vigilance and Enforcement Department has brought to light the irregularities by such companies in Hyderabad. Most of these companies were found to execute Loan-cum-Hypothecation agreements in violation of Indian Stamp Act, 1899. As per the act, these agreements attract stamp duty at the rate of 0.5 per cent under section 7 (b) of schedule 1-A.
The financial institutions while sanctioning loan to purchase vehicles enter into agreement in the name of hypothecation. Loan- cum- Hypothecated agreement is executed by the borrower, guarantor and financial institution includes certain conditions with regard to schedule and repayment of the loan and interest, terms of hypothecation, guarantor’s responsibilities, conditions to be followed in case of default, seizure of property and its disposal, arbitration and its jurisdiction, etc.
In inspections carried out by the Vigilance department, some finance institutions were found liable to pay stamp duty to the tune of lakhs and crores of rupees to the government. Among those in the list of the Vigilance department are Cholamandalam and L&T Finance. According to officials, Cholamandalam owed the state government stamp duty to the tune of Rs 1.28 crore for the period 2011-14.
The Principal Secretary (Revenue) was asked to issue instructions to the Commissioner and Inspector General (Registration and Stamps) to initiate action and realize stamp duty from various companies that were found to violate rules. According to government officials, a few of the financial institutions are entering into agreements on just hundred-rupee stamp paper.
They are not strictly following the law, which prescribes 0.5 per cent of the secured amount as stamp duty to be paid to the government, they said. While this is the case with NBFCs, some of the banks are also said to be using bouncers and getting vehicles seized even if the customer had paid 52 out of 60 EMIs and had defaulted in regard to two latest EMIs due to some reason.
By:Mahesh Avadhutha
