Banning Of Unregulated Lending Activities

INTRODUCTION

Digital Lending platforms, unregulated ‘peer to peer’ lending platforms, lending apps have mushroomed in recent times. Several of these unregulated lending activities have caused a great deal of harm to the financial ecosystem and have also impacted naive and gullible borrowers. Recognising this malaise, the Finance Ministry, Government of India has proposed a Law titled the Banning of Unregulated Lending Activities (“the Law”). The Bill is currently in its draft stage. Let us have a look at this important law that should impact the lending space in India. The Bill states that it is enacted to provide for a comprehensive mechanism to ban the unregulated lending activities other than lending to relative(s) and to protect the interest of borrowers. A few years ago, the Government enacted the Banning of Unregulated Deposit Schemes Act, 2019 to ban unregulated deposit schemes and to protect the interest of depositors. This is a second similar law aimed at banning unregulated lending activities.

The provisions of this Law shall have effect notwithstanding anything contained in any other law for the time being in force, including any law made by any State or Union Territory. Thus, it overrides any other law that is contrary.

UNREGULATED LENDING