Revenue Board for repeal of money-lending law, govt to take a call

Finance dept has put a dissenting note to proposal, saying that despite increasing penetration of banking system, moneylenders still play a crucial role in rural economy by meeting people’s borrowing needs.

LUCKNOW: Uttar Pradesh may like to retain the money-lending law despite the Board of Revenue recommending repeal of the nearly five-decade-old Act that, according to the latter, has outlived its utility with the expansion of organised banking system in the state, people aware of the issue said. The government, according to them, may, however, consider some amendments to the law to further secure and protect interests of borrowers in rural areas.

“Any final decision on retaining or repealing or amending the UP Regulation of MoneyLending Act, 1976, will be taken by the chief secretary after holding a joint meeting with the officials of the concerning departments such as the revenue, the Board of Revenue and the finance,” a senior official said.

“One round of the meeting has already taken place and the government’s initial view was that the law needs to be retained with or without amendments,” he added. The Board of Revenue, the highest revenue body, has sent a proposal to the state government strongly recommending repeal of the money-lending law on the ground that the reaching of banks to every nook and corner of the state had rendered the money-lending law regulating moneylenders irrelevant.

“We are of the opinion that moneylenders exploit rural people by lending money to them against at a very high rate of interest and stringent terms and conditions even as banks offer loans easily on more favourable terms and conditions,” said a Board of Revenue official requesting anonymity. “Moreover, many moneylenders also act as bankers by depositing savings of people in violation of the law and the RBI’s guidelines,” he said.

The government’s finance department is believed to have put a dissenting note to the Board of Revenue’s proposal, saying that despite increasing penetration of formal banking system moneylenders still play a crucial role in the rural economy by meeting people’s shortterm and emergency borrowing needs.

“The finance department has opined that despite an increasing presence of the organised banking system in the state, moneylenders played a crucial role in the rural economy and scrapping of the money-lending Act would only harm interests of small borrowers in villages because in that case moneylenders would continue lending with little regulation,” a revenue department official said.

Commenting on the issue, an economist and former director, Giri Institute of Developmental Studies, Ajit Kumar Singh said that while he was not quite familiar with the provisions of the UP Regulation of MoneyLending Act,1976, nobody could deny the utility of moneylenders.

“Moneylenders play a niche role in meeting borrowing needs of landless and small farmers even today when the state has a robust network of organised and formal banking system,” he said.

The rural banking was traditionally a monopoly of the moneylenders in the country and in Uttar Pradesh till the British government enacted Cooperative Society Act in 1904

. Uttar Pradesh, in 1976, enacted new law Uttar Pradesh Regulation of Money-Lending Act, 1976 to regulate moneylending transactions and ensure registration of moneylenders by laying down terms and conditions to save borrowers from exploitation at the hands of moneylenders.