Documentation for applications for loans is an important area which needs careful attention as well as professional expertise. Correct documentation is essential form the point of view of both the bank as well as the applicant for a loan. It is important that all the documents should be correctly drafted , adequately stamped and properly executed and the necessary formalities in this regard should be duly complied with. A charge on any property should be duly registered within the prescribed time. If at any time the bank has to institute any suit against any defaulter, the court may not pass a decree if the documents are not in order.
Documentation forms a permanent record of the rights and liabilities inter se the parties. Thus, it is not only desirable but also essential that all the parties should be conversant with prevalent and applicable laws in this regard. The process of documentation may be described as follows:
It is necessary to prepare a complete set of documents depending on the terms of sanction of credit facilities, nature of credit facilities, kind of securities ranking of charge on the security stipulated, kind of borrower and guarantor;
-
Drafting of the documents. Generally banks have their standard format of documents in this regard;
-
Adequate care needs to be exercised in relation to filling up of the requisite forms which are made available by the banks in the printed format;
-
Another vital aspect of the process of loan documentation is stamping of the documents according to the provisions of the Stamp Act;
-
It is also important to obtain the requisite permission of , if applicable, under the various statutes like Income-Tax Act, Land Acquisition Act etc.;
-
Signing and execution of the documents by the parties in a manner and as required by the laws applicable in this regard;
The formalities viz., attestation and registration of documents, filing of charges with the Registrar of Companies.
As all the loan application are not the same and requirements may vary from case to case and all the points mentioned above generally apply to a process of loan documentation.