The central government proposed a new bill to curb lending by unregulated entities, including digital platforms. Under the new bill, violators will face up to 7 years in prison. Lenders harassing and using unlawful methods to recover loans will face 10 years in prison, while those who promote such lending activities will get up to 5 years in jail. Offences will be cognisable and non-bailable under the proposed bill.
With 10 years of imprisonment, the penalty will be imposed, which could range from Rs 5 lakh to twice the loan amount. Unregulated lenders facing 2 to 7 years of imprisonment will be fined up to Rs 1 crore. Repeat offenders could be sent to jail for 10 years with a penalty of up to Rs 50 crore.
Under this new law, the CBI (Central Bureau of Investigation) will have to power search and seize without a warrant. The panel of RBI recommends this draft, and has been circulated by the finance ministry,
There have been too many complaints of borrowers taking loans from digital lending platforms at exorbitant rates. These platforms often blackmail customers in case of defaults. There have been a few incidents of borrowers committing suicide. Taking the matter seriously, the government took this step to improve the situation.
Chinese entities also operate some of these unregulated digital lending platforms. So, this step will also lower Chinese influence in India.
The drafted bill is named BULA (Banning of Unregulated Lending Activities), and the government requests the public to submit feedback on this bill. This bill defines unregulated lending activities as lending not covered by the law. Public lending activities are termed financing by any person, whether by loans, advances or other activity.
