Central

Section 13 of The Rehabilitation Finance Administration Act, 1948

(1)The Central Government may prescribe the limits as to amounts within which loans may be advanced by the Administration.
(2)For the purpose of advancing any loan under sub-section (1), the Administration may call for any report either through its own staff, or through the District Officer of the district in which the borrower resides or carries on business, or through any State 1 * * * Government, or through any bank of any other appropriate agency.
(3)The Administration shall charge interest from the borrower at such rate not exceeding 6 per cent. per annum as may be specified by it.
(4)The period of the loan shall not exceed 2 [fifteen] years.
(5)The loan may be advanced either for fixed capital or working capital or for both. The assets created from the loan shall, notwithstanding any law or usage to the contrary, be deemed to be mortgaged to the Administration for the repayment of the loan together with the interest thereon and the amount of the loan and the interest thereon shall be first charge on such assets.
(6)The Administration may also take such further security for any loan as it may consider necessary.

Summary

The Central Government decides the maximum amount of money that can be given as a loan.
The Administration can check a borrower's background by asking for reports from its own staff, local district officers, state governments, or banks.
Borrowers must pay interest, but the rate cannot go higher than 6 percent per year.
Loans can be used to buy long-term assets like machinery, or for daily business costs.
Anything bought with the loan money automatically serves as security for the loan, and the Administration has the first right to claim those assets if the loan is not paid.

Practical examples

1On August 10, 1950, a merchant named Anil borrows Rs. 15,000 from the Administration to start a small clothing factory. He uses the money to buy three weaving machines. Even without signing a separate security document, those three machines automatically become mortgaged to the Administration as security for his 10-year loan.

2Sunita applies for a loan of Rs. 5,000 on March 4, 1951, to cover the daily costs of running her bakery. The Administration sets her interest rate at 5 percent per year and gives her 8 years to pay it back, keeping safely below the legal maximums of 6 percent and 15 years.

FAQ

1. What is the highest interest rate I can be charged?

The interest rate will not be more than 6 percent per year.

2. Do I need to provide security for the loan?

Yes. Whatever assets you create or buy using the loan money are automatically mortgaged to the Administration. The Administration can also ask for extra security if they think it is needed.

3. Can the Administration investigate me before giving a loan?

Yes. They can ask for reports from local officers, state governments, or banks to check your details.

Test yourself

Q1.Under Section 13 of The Rehabilitation Finance Administration Act, 1948, what is the maximum interest rate that the Administration can charge a borrower?

Q2.Under Section 13 of The Rehabilitation Finance Administration Act, 1948, what is the maximum period allowed for a loan?

Q3.Under Section 13 of The Rehabilitation Finance Administration Act, 1948, who has the power to prescribe the limits on the amounts of loans that can be advanced?

Q4.Under Section 13 of The Rehabilitation Finance Administration Act, 1948, what happens to the assets created from the loan money?

Q5.Under Section 13 of The Rehabilitation Finance Administration Act, 1948, for what purpose can a loan be advanced?

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