By IANS
Mumbai : With a spate of suicides by farmers due to unscrupulous moneylenders, a central bank panel has called for their compulsory registration with flexibility to state governments in fixing the maximum interest rate.
The technical group chaired by Reserve Bank of India's (RBI's) S.C. Gupta has also proposed that the rule called "damdulat" be introduced whereby the amount of interest recoverable at a point of time does not exceed the principal.
The group, set up to renew legislations on money lending, submitted its report to the central bank Tuesday, and said the maximum rate of interest to be charged by moneylenders must be notified by the states.
The report said the procedures for registering moneylenders must be simpler and while determining the maximum rate, the costs and other expenses being charged should also be taken into account.
Alternate dispute resolution mechanisms like Lok Adalat and Nyaya Panchayat for speedy and economical dispensation of justice have also been proposed.
A new section has been suggested that will require state governments to place an annual report on the administration of the rules before state legislatures, in order to ensure that the enforcement of relevant laws is properly monitored.
The report has also suggested that states take adequate steps to publicise the advantages of registration of moneylenders, the maximum interest rates they can charge, the punishable offences and the dispute settlement machinery.
A new chapter has also been proposed for inclusion in various money lending laws to establish a link between the formal and informal credit providers, who are to be called "accredited loan providers".
Accordingly, the group has suggested a set of conditions in the pacts between the banks, financial institutions and accredited loan providers, as also some safeguard measures like enabling banks to inspect the books of moneylenders.
Advances made by institutional creditors to accredited loan providers should be treated as priority sector lending to encourage the banks to take up the role of institutional creditors.
Loans can then be disbursed through such linkages and accredited loan providers can become sources for additional business for banks, the technical committee report said.