NeSL’s application and data are hosted in a dedicated infrastructure with tier 4 data centre provider:
National E-Governance Services (NeSL), is an Information Utility (IU), regulated by Insolvency & Bankruptcy Board of India (IBBI) under the provisions of the Insolvency & Bankruptcy Code, 2016 (IBC or Code). Debajyoti Ray Chaudhuri, MD & CEO, NeSL, throws light on its initiatives and achievements.
Mehul Dani: What is an Information Utility?
Debajyoti Ray Chaudhuri: An information utility or IU, is widely regarded as one of the 4 pillars of the code. It is an Indian innovation, having no parallel anywhere in the world. An IU accepts electronic submission of financial information on debt, obtains verification and authentication from all the parties to the debt, stores the authenticated information in a safe and secure manner and provides access to the persons duly authorized under the code.
The authenticated information stored with an IU serves as legal evidence in the insolvency resolution process under IBC. This removes the asymmetry in financial information related to a debt and facilitates in adhering to the timelines provided for insolvency resolution under IBC. An IU accepts financial information both on financial and on operational credits, from regulated institutions like banks and even from private financial creditors.
Why should a creditor submit information to information utility?
Section 215(2) of the IBC mandates submission of data on all loans granted by financial creditors to the information utility. Further, Reserve Bank of India, has advised all the banks/financial institutions regulated by it, to comply with the above provision of IBC, by putting appropriate mechanisms in place, for submission of data on all the loans/ advances granted by them to information utility.
By uploading the data on loans/advances, the banks / financial institutions derive the following 6 benefits:
- a) The authenticated information stored with IU is treated as legal evidence in Insolvency Resolution Process under IBC. It helps establish the facts of borrowing and default thus saving time in insolvency resolution.
- b) As per Sec 99(3) of IBC, authenticated data with an IU provides irrefutable evidence in insolvency resolution process.
- c) While the record of default (ROD) can be used for proceedings under the IBC, it may be possible for the banks to derive evidentiary value on the ROD in other legal fora.
- d) The database maintained by IU helps the lenders to take informed decisions about credit. The Credit Facility Report (CFR) offered by NeSL-IU provides holistic view of the debtor/prospective client.
- e) The debt query report enables a creditor to know the existence of debt in the name of a client. This aids the banks for opening new current accounts.
- f) The authentication of financial information done by the debtor on IU platform serves as periodical confirmation of balance & acknowledgement of debt.
A user of the IU services gets alerted about insolvency proceedings being initiated against a company through email notifications. This serves as an early warning signal of incipient stress in a company and the creditor can take steps to protects its interests either by insisting on additional collateral or equity or withholding further disbursements. The alerts are received by users on the happening of 3 events: (i) When a default is reported on its debtor by any other creditor to NeSL-IU and on completion of authentication process; (ii) When an application for initiation of insolvency resolution is filed before the adjudicating authority, on its debtor by any other creditor; and (iii) When the application for CIRP on its debtor filed by any other creditor is admitted by the adjudicating authority and public announcement is made for submission of claims.
How safe is the information submitted to IU?
NeSL has a well-documented Information Security Management Systems (ISMS) in place and has achieved ISO/IEC 27001:2013 certification. The IU application and the data are hosted in a dedicated infrastructure with tier 4 data center provider empanelled by the Ministry of Electronics and Information Technology (MeitY).
NeSL under the guidance of its board approved technology committee, comprising of eminent technology leaders, periodically reviews the overall IT framework including security landscape. NeSL has a CTO who has responsibility for overall technology related issues and CISO specifically for information security related issues.
NeSL has implemented a Business Continuity plan, which is approved by NeSL Board and regulator IBBI. The DR is placed at a different seismic location with replication of data with the DC, consistent with the Recovery Point Objective (RPO) specified under the Technical Standards Guidelines issued by IBBI. The IU application is subjected to periodic internal and external audits.
What does NeSL offer as part of its IU Services?
NeSL offers Digital Documents Execution (DDE) platform as part of its IU Services. This provides for paperless, contactless, and seamless execution of contracts. The DDE platform enables completion of the last mile of loan disbursement with digital E-sign and E-stamping. In the absence of DSC, AADHAAR enabled E-sign can be used, the facility also supports biometric authentication.
For the execution of loan agreements, the documents like agreements, attract stamp duty corresponding to the stamp rules of the state concerned. Digital e-stamping is undertaken by NeSL on the IU platform by technology integration with the Stock Holding Corporation of India or Inspector General of Registrations of the state government concerned in other states. NeSL has a tie-up arrangement with them for e-stamping.
What does DDE ensure between the 2 parties?
DDE ensures that the banker from his office and borrower either in his business location or from his residence can execute the loan documents one after the other, as per the standardized documentation of individual bank, electronically. The process for a bank or creditor institution for availing our DDE service entails integration of its loans appraisal and processing system with NeSL’s DDE module through an API (Application Protocol Interface) integration. This DDE facility is not confined to bank loan contracts alone, it is available for execution of any contracts digitally between two parties.
Where are NeSL’s services available?
In 23 states / union territories, where digital stamping / e-stamping concept is already implemented as on date, the process of obtaining e-contracts / digital stamping is being done. NeSL has pursued with all other states for permission of paperless e-stamping and they are expected to accord permission shortly. NeSL also offers the storage facility of the loan documents electronically in a secured manner, and such digitized documents are available for always viewing and downloading by the Bank, even for enforcement of the contracts, in applicable cases.
Are documents executed through DDE legally enforceable?
Section 10A of the Information Technology Act expressly provides for validity of contracts formed through electronic means. Section 5 of the IT Act gives electronic signatures their legal character. Further, NeSL-IU gives a certificate under Section 65 of Indian Evidence Act, so that in applicable cases, the same can be filed before any court of law, during the process of enforcement of contracts.
What are the benefits of DDE?
The benefits to stakeholders are both by way of cost and convenience. Documents can be executed anytime and anywhere thereby saving costs and time by way of travel. They can be stored in a fully digital mode eliminating the need for physical storage and the costs and risks associated with it like loss due to fire, theft or forgery. DDE, by eliminating paper reduces our carbon footprint and contributes to sustainability. As India assumes presidency of the G20 it would contribute to meeting our Sustainable Development Goals (SDGs).
How many documents have been executed through DDE and in which segments?
As on 30th Nov 2022, a total number of 1.03 million digital contracts have executed on NeSL’s DDE platform by banks/FIs with their clients. The DDE platform is agnostic to customer segment or amount, or customer type, so, from financial segment loans to large corporate loans, all have been done on this platform. The breakup till date of individual/non-individual is 80:20. As of date, the IU holds debt records of more than 3 lakh companies, 2.4 million partnership firms and other entities, and more than 10 million individuals. These records amount to a staggering debt value of Rs184 trillion. It has also issued 78,000 record of default which help in initiation of insolvency proceedings against a company.
Home loans is the fastest growing loan segment in financial services industry. Can they be done through DDE?
A recent amendment to the IT Act, 2000 by the Ministry of Electronics and Information Technology has widened the scope of documents that can be digitally executed, including that for Home Loans. NeSL is still working on this, and we expect that home loans can also be done through DDE in due course of time.
__________
Read more-
Rs30 bn loans disbursed on NERL platform
