Kochi: The Kerala High Court on Wednesday held that the provisions under the Kerala Money Lenders Act were applicable to the non-banking financial institutions in the State.
Justice K. Balakrishnan Nair made the ruling while dismissing a batch of writ petitions seeking to declare that the Act would not be applicable to their institutions.
The petitioners contended that the non-banking institutions were established under the Reserve Bank of India Act. Therefore, it would not come under the provisions of the Kerala Money Lenders Act. No company could carry on the business of money lending or other non-banking activities such as hire purchase lending without getting registration from the RBI. These activities were regulated by the RBI.
The Judge observed that the provisions of the State law were meant to safeguard the interest of borrowers. The State law mandated the institutions to obtain licence for using the deposits.
The Judge observed that the Government notification fixing the rate of interest chargeable by moneylenders at the maximum limit of 12 per cent would apply to such types of loans for which the interest rate levied by the commercial banks was around 10 per cent. The court, while disposing of certain petitions filed by money lenders against the notification, made it clear that in all other cases where interest rate of the commercial loan was above 12 per cent, the petitioners could ignore the notification.
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