Uncategorized

Government plans to introduce Strict Bill to Ban Unregulated Lending


➡️ Click here to join our Whatsapp Group

The Ministry of Finance has proposed a new law to curb unregulated lending activities, both physical and digital, under the draft legislation titled Banning of Unregulated Lending Activities (BULA) Bill. The draft bill introduces severe penalties, including imprisonment of up to seven years and fines up to ₹1 crore for those engaged in unauthorized lending.

Harsh Penalties for Harassment

The draft law also includes provisions to penalize lenders who harass borrowers. In such cases, offenders could face up to 10 years in jail and fines amounting to twice the loan amount.

Objective of the Bill

The proposed legislation aims to ban lending activities by individuals or entities not authorized by the Reserve Bank of India (RBI) or other regulatory bodies. It applies to those not registered under existing laws governing lending activities.

“The proposed Bill envisages banning all persons/entities not authorised by RBI/other regulators and not registered under any other law for undertaking lending business activities,” the Ministry stated in its communication.

Public Feedback Invited

The draft has been released for public consultation, and feedback can be submitted until February 13, 2025.

Definition and Scope

The bill defines “public lending activity” as the business of financing, either through loans, advances, or other means, for purposes beyond the lender’s own activities, in exchange for interest. It excludes loans given to relatives.

It lists 20 laws that currently govern regulated lending, including the RBI Act, Banking Regulation Act, and State Money Lenders Acts, among others. Violations under the proposed law would be treated as cognizable and non-bailable offenses.

Punishments and Investigations

  • For unauthorized lending: A minimum jail term of two years, extendable to seven years, and fines ranging from ₹2 lakh to ₹1 crore.
  • For harassment: Jail terms of three to ten years and fines up to double the loan amount.

The bill also proposes transferring investigations to the Central Bureau of Investigation (CBI) if the case involves multiple states or union territories or if it significantly impacts public interest.

Regulatory Amendments and Digital Lending Rules

The draft bill follows recommendations made by the RBI’s Working Group on Digital Lending in November 2021. The group had called for stringent measures to tackle unregulated lending.

Additionally, the Ministry of Electronics and Information Technology (MeitY) has issued guidelines under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. These rules mandate app stores to host only loan apps approved by the RBI. Apps deemed unlawful under the existing laws can be removed from platforms upon government requests.

A Step Towards Safer Lending

The draft BULA Bill is a significant step towards protecting borrowers from exploitation and harassment while ensuring lending activities are conducted under proper regulatory oversight.

Leave a Reply

Your email address will not be published. Required fields are marked *