Money Lending License

What is a Money Lending License?

A money lending license is a legal authorization required by individuals or entities who intend to engage in the business of providing loans to the public or businesses. This license is mandatory in many jurisdictions to ensure that money lending activities are conducted in a regulated and transparent manner, protecting borrowers from unethical lending practices and ensuring lenders operate within the legal framework. Money Lending License in Rajasthan is issued once the applicant fulfills the conditions of Rajasthan Money Lenders Act, 1963 and Rules prescribed. Money lending license issued by SDM office of respective tehsil & Money lending Licence is essential for every person who does the finance business of lending money other than for the companies which are specially regulated by other regulators like RBI.

Documents Required for Obtaining a Money Lending License

• PAN Card of Applicant: Essential for identity verification.

• Aadhar Card of Applicant: Required for proof of identity and residence.

• Income Tax Return (ITR) of Last 3 Years: Along with computation of income.

• Resident Certificate of Applicant: Proof of residence.

• Character Certificate: Issued by a Gazette Officer of Applicant (2 Copies).

• Bank Statement of Last 1 Year: To show financial stability.

• Affidavit for money lending License: To show financial stability.

Basic Features of Money Lending License as per Rajasthan Money Lenders Act, 1963

• Validity of Money Lending License: The license issued is valid for a period of 3 years.

• Maximum Interest that Can Be Charged: As per the Rajasthan Money Lending Act 1963, the amount of interest on a loan cannot exceed the principal amount.

• Maximum Rate of Interest Charged: Money-lenders cannot charge or receive interest rates higher than the maximum rates set by the State Government. Current Rates: The maximum rates are fixed at 9% per annum for secured loans and 12% per annum for unsecured loans, as per the Rajasthan Money-Lenders Act, 1963.

• Exhibition of License: Every money lender must keep their name and license number exhibited in Hindi on their shop or place of business, as per Rajasthan Money Lenders Act, 1963.

• Prohibition on Accepting Blank Cheques: Any money lender cannot accept blank cheques as security.

Steps to Obtain a Money Lending License in Rajasthan

• Fill Out the Application: Complete the application for the grant of a license to a money-lender in Form No 2.

• Submit the Application: Furnish the application in Form No 2 along with required documents to the proper authority.

• Complete Police Verification: Undergo police verification as part of the application process.

• Receive the License: After reviewing the application, the department will issue the money lending license.

Conclusion

To operate as a money-lender in Rajasthan, one must comply with the Rajasthan Money-Lenders Act, 1963. This includes obtaining a valid license from the State Government, adhering to the maximum interest rates set by the government, and following other regulatory requirements. The government has fixed the maximum simple interest rates at 9% per annum for secured loans and 12% per annum for unsecured loans. Any money-lender charging interest rates above these limits is in violation of the Act and subject to penalties. This regulatory framework ensures fair lending practices and protects borrowers from exorbitant interest rates.

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