Bill prohibiting exorbitant interest rates passed

Published: 18th December 2012 09:14 AM  |   Last Updated: 18th December 2012 09:14 AM   |  A+A-

The State Assembly on Monday unanimously passed the Kerala Prohibition of Charging Exorbitant Interest Act, 2012.

 The Bill, aimed at penalising those money lenders who charge exorbitant interest from hapless borrowers, has provisions for imprisonment and imposing fine on those money lenders exploiting and harassing the borrowers.  Thanking the Opposition for its support in passing the Bill after  meaningful discussions in the House, Finance Minister K M Mani said that the Reserve Bank of India (RBI) had directed the State Government not to allow anybody to charge more than two per cent above the RBI-approved interest rate. Though there is provision for this in the Money Lenders Act of 1958, the societies, financial institutions and companies would not come under the existing Act. As per the provisions of the new Act, institutions and individuals engaged in money lending business other than banks will be banned from charging more than two per cent above the commercial bank rates.  The exorbitant interest charged could be adjusted against the principal amount after filing a complaint in the court. The Minister also said that the Act would ensure three years’ imprisonment and a fine of `5000 for charging exorbitant interests.  Harassment of borrowers would also attract imprisonment for one year and a fine of `10,000. In the case of the borrower committing suicide following harassment, it would attract five-year imprisonment and a fine of  `50,000.  When the Bill, as reported by the subject committee, came for the consideration of the House, the Opposition members could point out certain  limitations of the Bill. In their dissent note, the Opposition members of the subject committee called for strengthening of the Money Lenders Act of 1958. They also demanded inclusion of required provisions for interest control in micro-finance institutions.

 Participating in the discussion, Opposition deputy leader Kodiyeri Balakrishnan said that the Bill should be circulated among the public to seek their opinion as it was not effective enough to contain the ‘blade mafia.’  Alleging the govt of lacking commitment in containing the ‘blade mafia,’ he said that though the government had issued an ordinance on August 27 this year necessitating the Bill, it had not arrested anyone of the ‘blade mafia.’ He urged the Minister to act strongly against the mafia without any delay.

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