Money Lenders License

A money lender is an individual who lends a comparatively small amount of money as compared to other financial institutions at a higher rate of interest. The money lenders can charge a higher rate of interest as they face a greater risk of the receiver defaulting on the loan. People who are not able to receive loans from a bank for a variety of reasons approach these money lenders for loans.

The state list envisages matters pertaining to private money lenders. Therefore, state-specific law applies to this subject. Almost all states have their own laws. Some notable money lending acts are Bombay Money Lenders Act, 1946, Karnataka Money Lenders Act, 1961, The Punjab Registration of Money-Lenders Act, 1938, etc. Although the provisions are written under these different laws for each state, the essence of the provisions is inherently similar. Common features such as the following can be observed:

1. The requirement of a license for operating business of money within a specific jurisdiction and penalties for violation of the law.
2. The act lays down the maximum rate of interest that the lenders can charge.
3. Certain duties that the moneylender has such as providing a statement of accounts to debtors.
4. Penalties for intimidating the debtors or interfering with the activities, including the recognizability of said offenses.

Factors for the issue of License

The revenue department grants license to money lenders within a period of 4 months of submission. There are certain factors which are to be considered such as:

• Whether the individual is competent enough to run a lending business?
• If the individual’s premises are appropriate for running a business?
• Whether granting permission to the individual would be against public policy or not?

Documents Required

• Form A application form
• Passport size photographs
• 3 witness signatures

How to Apply

Step 1: Visit the Tahsildar Office

Firstly, The applicant has to visit the nearest Tahasildar office.

Step 2: Receive the application

Secondly, The applicant has to pay a fee of Rs. 100 to receive the application form from the Tahasildar.

Step 3: Enter the details

Thirdly, The applicant has to enter the required details in the application form.

Step 4: Submission of the form

Lastly, The applicant must submit the form at the Tahsildar’s office.

Haryana

In Haryana The Punjab Registration of Money Lender’s Act, 1938 is applicable. The registration and other duties of the money lender are carried out according to the provisions  of the said act.

The act provides for registrationAccording to this act, the registration of money lenders is not compulsory.

Legal Proceedings

Section 3: According to this section, a suit filed by a moneylender for the recovery of the amount will be dismissed by a court of law unless the moneylender is registered and licensed according to the provisions of this act.

Registration

Section 4: Any money lender may apply for registration at the office of the Collector of the district and his name will only be registered on the furnishing of the prescribed documents and on payment of the required fee.

(2) Any lender: not registered under this act

(3) If the moneylender continues the business, he is liable to a fine under this section.

1^st offense: Rs. 1000/-

2^nd offense and so on: Rs. 2000/-

Licensing

Section 5: Every money lender may apply to the collector for a license which shall be granted for a particular period after the production of the required documents and on payment of the fee as prescribed.

Other provisions of the act contain details such as:

• • Initially, Cancellation of license (Section 6)
  • Further, When can the collector act against the lender (Section 7)
  • Also, Further registration of license and extension of the license and registration (Section 10)
  • Lastly, Appeals and reviews (Section 11)
  • Furthermore, Haryana does not have a provision for keeping accounts, filing a statement of accounts/returns with registered authority and furnishing accounts to the borrowers.

By Aryan Dhingra
B.B.A LLB 2nd Year student of OP Jindal Global University