THE BOMBAY MONEY LENDERS ACT

THE BOMBAY MONEY LENDERS ACT

Saturday Brain Storming Thought (285) 26/07/2025

The Bombay Money Lenders Act, enacted in 1946, regulates and controls money lending activities within Maharashtra State (formerly Bombay)

It requires money lenders to obtain a licence, restricts the areas where they can operate, and sets limits on the maximum interest rates they can charge

The Act also outlines record-keeping requirements for money lenders and prohibits them from taking payments without providing a receipt

Key Provisions of The Bombay Money Lenders Act

1) Licensing

The Act mandates that money lenders obtain a licence to conduct their business

2) Territorial Restrictions

A money lender can only operate in the specific area for which their licence is granted and they must adhere to the license’s terms and conditions

3) Interest rate caps

The Act places limits on the maximum interest rates that money lenders can charge on loans

4) Record Keeping

Money lenders are required to maintain proper records, including a cash book and ledger, in a prescribed format

5) Receipts

Money lenders must provide a clear and complete receipt for any payment received from a debtor

6) Prohibition and Molestation

The Act also includes provisions to prevent the molestation of debtors for debt recovery

Purpose of The Bombay Money Lenders Act

The primary goal of the Bombay Money Lenders Act is to regulate and control money lending business, aiming to protect borrowers from exploitation and ensure fair lending practices

History of The Bombay Money Lenders Act

The enactment date 1946 and its purpose to regulate money lending in the Bombay Province

Scope of The Bombay Money Lenders Act

The Act extended to the entire Maharashtra state, outlining the areas it covers

Money Lender

A person whose business is lending money to others who pay interest to him

Loan

Act explains what is considered a loan transaction

Interest

Act defines the types of interest and the maximum interest rate permissible

Security

Act to discuss the types of securities and their implications

Interest charged by Money lenders legality

1) Simple interest on the balance of principal shall be calculated at the rate agreed between the parties

2) Interest should not exceed 9% per annum in case of secured loan

3) should not exceed 12% per annum in case of unsecured loan

Panalty for money lending without licence

1) Imprisonment of up to five years

2) Panalties can range from Rs 5 lakh to Rs 50 lakh

3) The bill also proposes cancellation of operations for unlicensed moneylenders and institutions

4) Charging interest rates beyond the permissible limits could also lead to imprisonment and fines

5) Harracenent, threats or forceful recovery of loans could result in imprisonment of up to five years and fines up to Rs 25 lakh

Lenders

1) A lender is a financial institution that lends money to a corporate or an individual borrower with the expectation that the money will be repaid at later date

2) Lender require borrowers to pay interest on the amount borrowed, usually charges at a specific percentage of the total amount of loan

3) A lender can be a person, group or business that specializes in providing loans to the individual or corporations

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