In order to prevent unregulated indigenous lenders from charging borrowers high-interest rates, money-lending legislation was developed by various state legislatures. These regulations normally demand that money lenders obtain licences, have a cap on the amount of interest they may charge, and generally stipulate that a court of law will not hear a case brought on by an unlicensed money lender.
Conditions for Obtaining a Money Lending Licence
According to the Money Lending Act operational in Maharastra, no money lender may conduct money-lending activity except in the region for which he has been given a licence. The word used here is ‘money-lending business.’ Money-lending here refers to the providing of loans in cash or kind, whether in combination with or in addition to any other business.
Who is Eligible for a Money Lender License?
When determining whether an applicant is eligible for a money recovery for lender license the following aspects are taken into consideration
Whether they are capable of managing a firm that lends money.
Whether the applicant’s location is suitable for operating their firm.
Whether granting the licence would be contrary to general welfare
These aspects are taken into consideration when a licence is issued, renewed, or endorsed.
What are the Documents Required to Obtain a Money Lender License?
The following documents are required to obtain a money lender license –
Application form ( Form A)
Passport size photograph
(3) specimen signatures mentioning the money lenders name as well as his nominee
Validity of Money Lender Licence
The Revenue Department typically issues a money lender licence three to four months after the application is submitted. The application is valid for a year after it has been submitted. However,
How to Obtain a Money Lender License: Step-by-Step Guide
To obtain a money lending license, the following steps must be followed.
Step 1: The applicant must head to the appropriate Tahasildar office o
Step 2: Following this, the applicant must obtain the application form from the Tahasildar, for which the applicant must pay a fee of ₹100.
Step 3: The applicant must then fill out the application form with the necessary information.
Step 4: Once duly filled the form must be submitted to the Tahasildar’s office.
Penalty for Not Obtaining a Money Lender License
According to Section 39 of Maharastra’s Money Lending Act, anybody who undertakes money-lending activity without a valid license risks a punishment of –
Imprisonment for a term that may be up to 5 years, or a fine of up to ₹ 50,000, or both.
In our opinion, given the seriousness of the penalties for lending money without a legitimate licence, it is critical for lenders to determine if they are in the money-lending industry and whether they have a proper licence to do so.
The Takeaway
Obtaining a valid licence under the Money Lending Act allows money lenders to operate legally and have legal experts remedies against defaulters, nevertheless one of the primary reasons for non-registration is the interest rate ceiling. Moreover, many lenders are not even aware that such a licence is required.
Though acquiring a money lender licence appears to be a hassle, it is always a good idea to do so, especially if you are lending substantial sums of money. Furthermore, given the high likelihood of default in the money lending industry, it is preferable to obtain a licence, since only registered money lenders may bring such matters to a court of law.
Scope and Need for a Money Lender License
In order to prevent unregulated indigenous lenders from charging borrowers high-interest rates, money-lending legislation was developed by various state legislatures. These regulations normally demand that money lenders obtain licences, have a cap on the amount of interest they may charge, and generally stipulate that a court of law will not hear a case brought on by an unlicensed money lender.
Conditions for Obtaining a Money Lending Licence
According to the Money Lending Act operational in Maharastra, no money lender may conduct money-lending activity except in the region for which he has been given a licence. The word used here is ‘money-lending business.’ Money-lending here refers to the providing of loans in cash or kind, whether in combination with or in addition to any other business.
Who is Eligible for a Money Lender License?
When determining whether an applicant is eligible for a money recovery for lender license the following aspects are taken into consideration
Whether they are capable of managing a firm that lends money.
Whether the applicant’s location is suitable for operating their firm.
Whether granting the licence would be contrary to general welfare
These aspects are taken into consideration when a licence is issued, renewed, or endorsed.
What are the Documents Required to Obtain a Money Lender License?
The following documents are required to obtain a money lender license –
Application form ( Form A)
Passport size photograph
(3) specimen signatures mentioning the money lenders name as well as his nominee
Validity of Money Lender Licence
The Revenue Department typically issues a money lender licence three to four months after the application is submitted. The application is valid for a year after it has been submitted. However,
How to Obtain a Money Lender License: Step-by-Step Guide
To obtain a money lending license, the following steps must be followed.
Step 1: The applicant must head to the appropriate Tahasildar office o
Step 2: Following this, the applicant must obtain the application form from the Tahasildar, for which the applicant must pay a fee of ₹100.
Step 3: The applicant must then fill out the application form with the necessary information.
Step 4: Once duly filled the form must be submitted to the Tahasildar’s office.
Penalty for Not Obtaining a Money Lender License
According to Section 39 of Maharastra’s Money Lending Act, anybody who undertakes money-lending activity without a valid license risks a punishment of –
Imprisonment for a term that may be up to 5 years, or a fine of up to ₹ 50,000, or both.
In our opinion, given the seriousness of the penalties for lending money without a legitimate licence, it is critical for lenders to determine if they are in the money-lending industry and whether they have a proper licence to do so.
The Takeaway
Obtaining a valid licence under the Money Lending Act allows money lenders to operate legally and have legal experts remedies against defaulters, nevertheless one of the primary reasons for non-registration is the interest rate ceiling. Moreover, many lenders are not even aware that such a licence is required.
Though acquiring a money lender licence appears to be a hassle, it is always a good idea to do so, especially if you are lending substantial sums of money. Furthermore, given the high likelihood of default in the money lending industry, it is preferable to obtain a licence, since only registered money lenders may bring such matters to a court of law.