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CIVIL.03   ---   Improving resolution of loan/default related disputes

Section   1   : Scope of this act, and appointing officers in-charge
1.1 The act will apply ONLY to the loans give/taken under using "borrower's account" as dedcribed in the Act. If a lender has given loan by any means other than via borrower's account, this act will NOT apply on that loan.
1.2 The PM will appoint a Loan Registrar and Recollection Officer, or Loan Registrar for short, for every District, who will register the loans and related contracts, and will resolve disputes if any using Jury and will carry out confiscation and auctions if the need be.
1.3 The citizens can expel/fine the Loan Registrar using "Jury Trial over State Govt Staff" Act.
Section   2   : Creating Borrowers' Accounts
2.1 Any bank registered with RBI may provide a facility called "borrower's account". The bank will operate the account as follow :
  1. A person who intends to borrow money under this Act will have to open a borrower account.
  2. The person must be individual over 18 or a company other than properitorship, but NOT a trust, HUF or any other entity.
  3. The person must have income tax-ID, and must provide it at the time of opening the account. The bank shall NOT open the account without income tax ID.
  4. The person can open at most one borrower's account in the country. If a person opne more than one borrower's account, the Juror may imprison the person for 1 year.
  5. The banks will report opening of borrower's account to RBI. If RBI's officer in-charge

Section   3   : Giving a loan under this Act
2.1 If a party decides to give a loan to a counter-party under this Act, he MUST have an income tax ID, and income tax ID must be registered with in his bank where he has his account. The lender will give loan by asking his own bank, to deposit the funds from his (i.e. lender's) account to the borrower's account in the borrower's bank. The lender will specify the interest rate. The lender's bank will communicate the interest rate to the borrower's bank.
2.2 If the borrower rejects the loan, or he does NOT accept the loan within 7 days, the borrower's bank will return the money to the lender's bank, and no charge will be required. If the borrower accepts the loan, the borrower's bank will notify the lender's bank, who shall notify the lender. The borrower's bank will deposit the monet in the borrower's bank account as specified the borrower.
2.3 The PM can decide the upper limit on the interest rate, called as PM's maximum interest rate or "maximum rate" for short henceforth, and may change it from time to time. If the rate specified by the lender is below that rate, the lender's rate will be applicable. If the rate is above lender's rate, the maximum rate specified by the PM shall apply.
2.4 When a borrower intends to repay the loan/principal, he MUST deposit the money in the borrower's account ONLY and shall NOT directly pay to the lenders. The money directly paid to the lender shall NOT be considered as a repayment under this Act.
2.5 The money deposited by the borrower will be sent to lenders in the direct proportion of loan amount initially lent multiplied by reciprocal of interest rate applied on the loan. Those who have specified the interest rate of 0% or any rate less than 1/4th the maximum rate, the rate equal to 1/4th of maximum rate applied by PM will apply.

Example1 : Say a person has obtained two loans of Rs 100,000 and Rs 200,000 and interest rate is same. If that borrower deposits Rs 3000 in the loan account, then bank will send Rs 1000 to first and Rs 2000 to the second lender respectively.

Example2 : Say a person has obtained two loans of Rs 100,000 and Rs 100,000 and interest rate is is 16% and 8%. And both rates are between 1/4th of maximum rate and maximum rate. So the ratio in which payments will be divided will be 100000*100/16 : 100000*100/8 i.e. 1:2. So if the person deposits Rs 3000 as loan repayments, the first lender will get Rs 1000 and second will get Rs 2000.

Example3 : Say maximum rate decided by PM is 16%. Now if two lenders have loaned Rs 100000 each at 2% and 10%, the ratio in which repayment will be split will be as if first lender's rate is 4%. So ratio in which repayments will be split will be 100000*100/4 : 100000*100/10 i.e. 2:5.

2.6 A person must deposit 25% of his salary income every month and 25% of other incomes every year into his borrower account, if he has any pending loans. If he doesnt, the Jurors may issue a fine of upto 50% of his total income, and a prison sentence of upto 1 year.
2.6 The bank will calculate interest quarterly i.e. all interest due on the opening balance of the quarter will be added to the prinicipal to make the new principal. There will be no pre-payment penalty.

Section   3   : Resolving disputes
3.1 If there is any dispute between owners and tenants, the Rental Officer, or an officer appointed by him will draft the verdict. If eighter party refuses to accept the verdict, the Rental Officer will call a Jury of 12 citizens to decide by simple majority. The verdict of Jurors will be equivalent to the verdict of the District Court, and will be binding unless stayed by a Higher Court.

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