Loan Agreements and Promissory Notes Online: What Changed in 2022, What Still Needs Ink, and How to Build a Digital Loan File
Since September 2022 a demand promissory note or bill of exchange in favour of a bank or NBFC can be executed electronically; one between private parties still cannot. What that means for lenders, borrowers and businesses that lend to each other, and how a compliant digital loan file is built.
Lending documentation is where the IT Act's First Schedule bites hardest. For twenty years every negotiable instrument other than a cheque was outside the Act, which meant the demand promissory note at the heart of most loan files had to be signed on paper. The 26 September 2022 amendment changed that for regulated lenders but not for everyone. This guide explains the current position and how a loan file is assembled digitally. Position as of October 2026.
The loan file
A typical secured or unsecured business loan involves: the loan or facility agreement; a demand promissory note (DPN); security documents (hypothecation, pledge, mortgage, guarantee); a Key Fact Statement for regulated digital lending; KYC records; and, for mortgages, registration. Each has its own execution rule.
What the 2022 amendment did
MeitY's notification S.O. 4720(E) of 26 September 2022 amended the First Schedule to the IT Act, 2000. Entry 1 (negotiable instruments other than cheques) now carves out "a demand promissory note or a bill of exchange issued in favour of or endorsed by an entity regulated by" the RBI, National Housing Bank, SEBI, IRDAI or PFRDA. Entry 2 (powers of attorney) carves out a power of attorney empowering such an entity to act for the executant. Entry 5 (contracts for sale or conveyance of immovable property) was deleted.
Consequences:
- A DPN in favour of a bank, NBFC, housing finance company or other regulated lender can be an electronic record signed electronically.
- A DPN between two companies, or between individuals (a director's loan to the company, an inter-corporate deposit, a private loan) remains excluded and must be executed on paper.
- A loan agreement itself was never excluded; it has always been capable of electronic execution. The DPN was the blocker.
- A mortgage deed is no longer excluded by the IT Act, but registration under section 17(1)(b) of the Registration Act, 1908 and the state's registration process still apply, and mortgage by deposit of title deeds has its own mechanics.
- A power of attorney in favour of the lender (for enforcement of security) can be electronic; a general POA between private parties cannot.
Stamp duty on loan documents
Loan agreements, DPNs, hypothecation deeds and guarantees are each chargeable under the state schedule; DPNs carry duty under the central Act's schedule as well. Section 17 of the Indian Stamp Act, 1899 requires stamping before or at execution; section 35 bars an unstamped instrument from evidence until duty and penalty are paid. For a digital loan file, generate the e-stamp per instrument before the signature request.
Regulated digital lending
For banks and NBFCs lending through digital channels, the RBI's Digital Lending Directions require a Key Fact Statement and the loan documents to be provided to the borrower digitally, and their arrangements with lending service providers fall within the 2025 outsourcing Directions' agreement-content rules (audit rights, data storage in India where applicable, incident reporting, exit). **** Borrower data is personal data under the DPDP Act, 2023, with notice, consent or legitimate-use basis and security duties from 13 May 2027.
Building the digital loan file
| Document | Electronic execution | Stamp | Other step |
|---|---|---|---|
| Loan / facility agreement | Yes (DSC or Aadhaar eSign) | Yes, state rate | - |
| DPN in favour of regulated lender | Yes, since 2022 | Yes | - |
| DPN between private parties | No, paper | Yes | - |
| Hypothecation / pledge | Yes | Yes | Charge registration with ROC for companies (Companies Act, 2013, section 77) |
| Guarantee | Yes (section 126 of the Contract Act allows oral or written; use written) | Yes | - |
| Mortgage deed | Yes for execution since 2022 | Yes | Registration (Registration Act s. 17(1)(b)) |
| POA in favour of lender | Yes, since 2022 | Yes | - |
| KFS acknowledgement | Yes (OTP eSign / platform) | No | RBI directions |
Record for each document the signature method, the stamp certificate and the audit trail, and keep them together; the file is proved under section 63 of the Bharatiya Sakshya Adhiniyam, 2023.
For businesses that lend to each other
Inter-corporate loans and director loans are common and badly documented. Use a loan agreement (electronic is fine), a paper DPN if you want one (electronic is not available between private parties), stamp both, and track repayment dates, interest and any TDS on interest in the obligation register. Confirm Companies Act, 2013 compliance for loans to directors and inter-corporate loans (sections 185 and 186) with your company secretary.
Where Legatio fits. Legatio executes the loan agreement, security documents and regulated-lender DPNs electronically with per-instrument stamping and audit trails, flags the documents that must stay on paper, and tracks repayment and renewal dates. The lending rules are the RBI's and the statutes'.
Position stated as of October 2026. General information, not legal advice; regulated lenders should confirm against the current RBI directions.