UP takes Union Budget forward, amends money lending law

In a bid to be one up with the Union Finance Minister P Chidambaram, the Uttar Pradesh government, in a measure aimed at providing relief to the debt-ridden farmers, has amended the Uttar Pradesh Regulation of Money Lending Act, 1976.

The amendment seeks to enhance the punishment for money lenders in case they resort to coercive measures in recovery of loans.

In case of non-recovery of the loans, the money lenders will have to inform the registrar, the licensing authority. The recovery of loan without informing the registrar will invite imprisonment for up to three years and fine of Rs 5,000 or both.

The amendment also aims to regulate the business of money lending by the money lenders.

According to the amended law, money lenders will serve a notice of one month to the borrower and also send a copy of the notice to the registrar, firms and societies. With the amendment, nobody can do money lending business without obtaining the license from the registrar. The money lender will now also be required to submit all information of the loan account as and when sought by the borrower.

The Act also empowers the registrar to inspect the accounts of money lenders every six months and issue periodic guidelines and directions for the conduct of business in a transparent manner.

The tenure of the license has been reduced from ten years to three years. In case of non recovery of the loan, the money lender will apply to the registrar. The registrar will in turn issue directions to the borrower.

Piloting the Bill in the assembly, the State Parliamentary Affairs Minister Lalji Verma said the Act was enacted to protect the interests of the farmers and weaker sections of society who borrowed from money lenders.

He said it was brought to the notice of the government that money lenders were exploiting the poor. He said it has, therefore, been decided to amend the Act so that the weaker sections of the society could be protected from such exploitations and coercive action of the money lenders.

It may be pointed out that UP is set to be the biggest beneficiary of the total loan waiver scheme announced by Finance Minister PC Chidambaram in the annual Budget.

Of the 4 crore beneficiaries estimated by the finance minister, almost half of them were in UP. In UP, the small and marginal farmers household account for 2.25 crore and 90 per cent of them are borrowers from PSU banks, regional rural banks and district co-operative banks. As much as 1.35 crore farmers have been issued kisan credit card. Most of these card holders were the small and marginal farmers.

"The exact number of beneficiaries could be worked only after the detailed circular is issued by the Reserve Bank of India, yet the loan waiver has given much more than what the UP government had demanded from the Centre for the Bundelkhand region," said a senior official of the relief and revenue department, who had prepared the package.

According to government records, the total outstanding agriculture loans and overdue last year-end in seven districts of Bundelkhand was Rs 13,148 crore. This included Rs 10,173 crore principal amount and Rs 304 crore on account of interest. The number of loan accounts was 9,28,000.

The total number of agriculture loan accounts by the end of December 2007, in whole of UP, were over 46 Lakh and total outstanding including principal and interest during the same period was over Rs 20,00 crore.

Till the end of December 31, as many as 14 Lakh recovery certificates were issued by 10,437 branches of the banks in UP. The banks include nationalised banks, regional rural banks, district cooperative banks and 13 private banks.