india

Updated: May 16, 2019 07:29 IST

The Madhya Pradesh government is considering amending the 84-year-old Money Lenders Act to define the payment schedule and caps on interest rates in an attempt to help farmers who have borrowed from moneylenders.

Government officials familiar with the matter said that the move comes against the backdrop ta suicides by at least four debt-ridden farmers over the past three weeks; all four had borrowed from moneylenders.

The decision was taken after a meeting of the state’s chief secretary with bankers, officials of non-banking financial companies (NBFCs), the state’s finance, agriculture, and other relevant departments, the officials added.

They said that the Madhya Pradesh finance and law departments have been tasked with coming up with the amendments.The changes being considered include: caps on the interest that can be charged; a written agreement between the lender and borrower; and penalties for moneylenders charging more interest than mandated.

Legislations for regulation money lending are state-specific in India. Maharashtra defines interest rates as MP plans to do. Section 31 of The Maharashtra Money-lending (Regulation) Act, 2014, says, “The State Government may by notification in the Official Gazette, fix the maximum rates of interest to be charged by a moneylender in respect of secured loan and unsecured loan...”.

The current legislation is largely focused on licensing of moneylenders. Although bank credit is available to farmers, many still prefer to take small unsecured loans from local moneylenders, usually at a high interest rate. “In the 1934 Money Lenders Act, the last amendment was done in 2001... The main reason behind the plight of farmers is money lenders’ malpractices and we want to resolve this,” said SR Mohanty, the state’s chief secretary.Leader of opposition and former rural and panchayat minister Gopal Bhargava (from the Bharatiya Janata Party) said: “The farmers are facing a tough time due to unfulfilled promises of the Congress and the Congress government wants to divert the attention of farmers by underlining the flaws in the law.”

Congress spokesperson JP Dhanopia said, “There is a need to amend the law and that is what government officers are doing. Everybody knows how moneylenders are harassing farmers.” Justice (retired) Abhay Gohil said, “All acts related to money lenders were made to stop the exploitation of people especially in rural areas. Like Maharashtra, Madhya Pradesh can bring a new law which is more relevant to present-day conditions. Fixing interest rates will strengthen the law to act against the harassment by money lenders. The rate should be decided as per RBI guidelines.”