Who are money lenders?

In order to prevent unregulated indigenous lenders from charging borrowers high interest rates, money-lending legislation were developed. These regulations normally demand that money lenders obtain licenses, have a cap on the amount of interest they can charge, and generally state that a court will not hear a case brought by an unlicensed money lender.

The question of whether unregulated entities engaging in the “business” of lending would need to register under the money-lending laws arises despite the fact that financial entities like banks, insurance companies, non-banking financial companies and others have been exempt from obtaining money-lending licenses as these are regulated by other laws. Also,with loan solutions that can benefit you and your business, good at money lending in tanjong pagar can help you.

Who are money lenders?

Although the country has a robust network of financial institutions, access to these institutions is frequently inaccessible to the rural areas. Furthermore, because banks have strict criteria for KYC and collateral, it is challenging for them to offer loans to small farmers. Since they primarily serve a segment of borrowers that other financial institutions, including banks, cannot reach, money lenders fill a niche in the market.

There was a need for a robust framework to govern their operations because they have been such a crucial link between the formal lending sector and the informal borrowing sector. The State Legislature has the only authority to enact legislation governing activities related to money lending, as stated in Entry 30 of List II (i.e., the State List) of the Seventh Schedule to the Constitution of India. The Maharashtra Money-Lending (Regulation) Act, 2014 (the “Money Lending Act”) was passed by the state legislature to govern money-lending transactions in the state. However, there are different money-lending laws in other states as well. The Maharashtra Money Lending Law clauses are the subject of our article.

According to the Money Lending Act, a money lender is only permitted to operate in the geographic area for which he has been issued a license. The phrase “business of money-lending” is used here. Money lending is the practice of making loans, whether in kind or cash, whether or not in conjunction with another business or in addition to it.

The aforementioned definition clarifies the following points:

  • Lenders should treat their lending activities as a business.
  • It might or might not be the lender’s main line of business; • It might or might not be in cash.


Even though having a valid license under the Money Lending Act enables money lenders to operate legally and pursue defaulters in court, one of the main barriers to registration is the interest rate cap. Many lenders aren’t even aware that this registration is necessary.