Lawcurb

From a legal perspective, a secured loan is one backed by an identifiable asset or property (collateral) that the lender can seize and sell if the borrower defaults, whereas an unsecured loan is not protected by any collateral, leaving the lender to recover the debt through a civil suit and decree execution. This fundamental distinction affects the lender's priority during the borrower's insolvency, as secured creditors have a prior claim over the charged assets compared to unsecured creditors.

Recent RBI circulars on digital lending mandate strict compliance with data privacy norms, require direct bank-to-bank transactions between lenders and borrowers without any third-party pass-through, and demand clear disclosure of the Annual Percentage Rate (APR) to prevent usury, but legal concerns arise around the unregulated activities of lending service providers (LSPs) and the potential for flouting these rules through technological loopholes.

Under Section 139 of the NI Act, a banker is liable for wrongful dishonour of a cheque if it has sufficient funds of the customer, and the customer can sue for damages; however, the bank's liability under Section 138 arises only when the dishonour is due to insufficient funds, not for other technical reasons.