The proposed Banning of Unregulated Lending Activities under BULA Bill seeks to curb unregulated lending by imposing stringent penalties, including jail terms of up to seven years and fines as high as ₹1 crore for offenders.
The draft legislation, introduced by the Financial Services Department of the Ministry of Finance, targets individuals and entities engaging in unauthorized lending, whether through physical or digital channels.
Firstly, this Bill actually defines "public lending activity" as lending money for interest by any individual or entity not authorized by regulators such as the RBI or those unregistered under relevant laws. It excludes loans to relatives and covers existing legislation such as the RBI Act, Banking Regulation Act, and State Money Lenders Acts.
Violations are classified as cognizable and non-bailable offences, with punishments ranging from two to seven years in prison and fines between ₹2 lakh to ₹1 crore. To ensure enforcement, cases involving large amounts or interstate elements can be transferred to the CBI. The public is invited to provide feedback on the draft by February 13, 2025.
The BULA bill also proposes harsher punishments for lenders harassing borrowers, with imprisonment up to 10 years and fines up to double the loan amounting such cases.
The Bill builds on recommendations from the RBI’s Working Group on Digital Lending and earlier government actions like the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which regulate the removal of unlawful lending apps.
These measures aim to protect borrowers, enforce ethical lending practices, and strengthen oversight of digital and traditional lending platforms. By empowering the government to revise regulated activities in collaboration with financial regulators, they reinforce efforts to curb unauthorized lending and uphold public interest. With this, we conclude today's updates, urging everyone to stay informed and secure.
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