The Finance Ministry has sought views on the draft bill to rein in unregulated lending activities, including digital lending, in order to ban unauthorised people and entities, which some offenses to be made cognisable and non-bailable.
A working group set up by the Reserve Bank of India had in November 2001 submitted a report suggesting measures to curb unregulated lending activities and protect consumers, including bringing in a legislation for banning such persons or entities. Such entities, if found guilty, will be liable to punishment of between 2-7 years' imprisonment, and up to Rs 1 crore fine.
The Centre has sought comments and suggestions on the proposed bill, called Banning of Unregulated Lending Activities (BULA).
The proposed draft forbids any statement, promise or forecast that is false, deceptive or misleading to induce another person from seek loan from unregulated lenders.
There will be a competent authority or officers appointed for the purpose of this Act, who shall have the same powers as a civil court to conduct investigation or inquiry, and issue summons during the investigation, as well as impound records, the draft has proposed. Where required, the State Police shall have the powers to enter, search and seize without warrant, or seek an order to freeze property, account, or securities.
An online database will be created on lenders operating in India and the common public shall be able to search for entities undertaking regulated lending activities and also report on illegal or cloned lenders.
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This competent authority will be sharing all information with the Central Bureau of Investigation or the State Police, the proposal said. The draft bill also proposes to set up designated courts which shall be presided by a District and Sessions Judge.
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Instances where advertisements of unregulated lending activities may have been published will require the publication to issue a retraction as well, said the draft note.
One recent study by Paisabazaar - a consumer credit marketplace - has shown that more than 70% of MSMEs (Micro, Small, and Medium Enterprises) seek funding to meet immediate financial needs, and less than 30% of the businesses seeks credit for growth activities.
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