How do e-signatures work in loan agreements?

E-signatures, or electronic signatures are legally accepted methods of signing documents electronically in India. E-signatures are valid under the Information Technology Act in 2000 for executing loan agreements and other agreements relevant to financing transactions provided it meets the requirements.

For business loan agreements, there is normally a process of signing the 'loan kit' electronically by both the lender and borrower. The loan kit comprises the Key Fact Statement (KFS), a summary of the loan product, the sanction letter, terms and conditions, account statements, and privacy policies. The e-signature process must conform to the IT Act and is generally achieved by one of the following:

• Aadhaar eSign (through OTP, biometric, or other authentication mechanism)
• Aadhaar XML eSign (through a one-off XML file authentication)
• Digital Signatures Certificate (DSC) tokens
• PAN eSign
• DocSigner platforms

The RBI Digital Lending Directions dated 2025 indicate that clickwrap and OTP signatures only cannot be relied on alone for digital lending. The full loan kit must be digitally signed and sent by valid IT Act Signature and automatically sent to the borrower's email or SMS following signing. The borrower's digital signature is requisite for the contract to be executed.

With the e-signature process you have executed the contract with authenticity, non-repudiation and integrity to the loan agreement and has legal enforceability. Borrowers should educate themselves on the e-signature platform to ensure authenticity and make sure all documents have been sent and stored accordingly and securely to refer to in the future.