Page 193 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes The important clauses in a hire purchase agreement are:
1. Nature of Agreement: Stating the nature, term and commencement of the agreement.
2. Delivery of Equipment: The place and time of delivery and the hirer's liability to bear
delivery charges.

3. Location: The place where the equipment shall be kept during the period of hire.
4. Inspection: That the hirer has examined the equipment and is satisfied with it.
5. Repairs: The hirer to obtain at his cost, insurance on the equipment and to hand over the
insurance policies to the owner.

6. Alteration: The hirer not to make any alterations, additions and so on to the equipment,
without prior consent of the owner.
7. Termination: The events or acts of hirer that would constitute a default eligible to terminate
the agreement.
8. Risk: Risk of loss and damages to be borne by the hirer.
9. Registration and fees: The hirer to comply with the relevant laws, obtain registration and
bear all requisite fees.

10. Indemnity clause: The clause as per Contract Act, to indemnify the lender.
11. Stamp duty: Clause specifying the stamp duty liability to be borne by the hirer.
12. Schedule: Schedule of equipments forming subject matter of agreement.
13. Schedule of hire charges.
The agreement is usually accompanied by a promissory note signed by the hirer for the full
amount payable under the agreement including the interest and finance charges.

Caselet Higher Deposit Limit sought for unrated Hire
Purchase Cost

n a recent Credit Policy representation to the Reserve Bank Governor, the Association
of Leasing & Financial Services Cos (ALFS) has urged the apex bank to increase the
Ideposit acceptance limit of unrated Hire Purchase and Leasing Companies (HPLCs)
from the existing one-and-a-half times to at least three times their Net Owned Funds
(NOF).
It is further suggested that rating should not be used as a regulatory tool, particularly
when it was an option only.

The deposit acceptance limit for unrated HPLCs was prescribed in 1998 following the
recommendations of the Task Force on NBFCs, with a clear understanding that the limit
would be reviewed in the light of regulatory experience over such companies, said Mr
Mahesh Thakkar, Executive Director of ALFS.
The level of confidence enjoyed by HPLCs today, according to him, is far more than what
it was in 1998. It is high time the RBI gave some relief to the well-run HPLCs, which have
survived the turmoil in this sector in the last three years, he pointed out.

Contd...

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