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TN leash on steep interest

Chennai, June 11: Tamil Nadu has cracked down on the unorganised call money market in the state, charging of high interest rates and financiers threatening debtors with dire consequences. It has responded to this practice by promulgating an Ordinance banning exorbitant interest rates.

The Tamil Nadu Prohibition of Charging Exorbitant Interest Ordinance 2003, promulgated by Governor P.S. Rama Mohan Rao last night, aims to do away with what is widely known as kandu vetti and thandal (lending at high rates of interest). It also cracks down on interest rates charged on an hourly and daily basis.

The Ordinance comes in the wake of film producer G.Venkateshwaran’s recent suicide after he was allegedly unable to cope with the pressure from illegal money market operators in Madurai.

The Ordinance envisages a maximum three-year jail term and a fine of Rs 30,000 for those who contravene the provisions and “molest” or “attempt to molest” any debtor to recover loans.

It says: “If any debtor or any of his family member commits suicide — and it is shown that, immediately prior to the suicide, the deceased was subject to harassment by the person who had advanced the loan — the creditor would be deemed to have abetted the suicide, unless he proves his innocence.”

The Ordinance directs that no person should charge exorbitant interest on any loan. The debtor can deposit the loan amount along with interest calculated at the rate fixed by the government under Section 7 of the Tamil Nadu Money Lenders Act, 1957, with the jurisdictional court along with a petition. On receiving the petition, the court can direct the creditor to provide his version within 15 days, it says.

The court has also been empowered to restore possession of moveable and immovable property forcibly taken over in lieu of the loan to the debtor. Further, it can order adjustment of excess interest paid by the debtor against the principal amount and legally permissible interest.

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