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If an individual is considering starting a money lending business in India, obtaining a license is necessary! This license is an absolute necessity to ensure that the performed lending activities comply with the respective rules and regulations, hence protecting the interest of both parties and avoiding any legal risks. In this comprehensive article, we will outline the documents needed for acquiring a money lending license and answer some critical questions related to this process.
Yes! An individual can pursue a money lending business, but with some conditions, especially in India, an individual can become a money lender and get started in this business. However, meeting the specific criteria and obtaining the license to operate legally is crucial.
Here’s a step-by-step guide explaining the whole process of obtaining a money lending license in India:
In this dynamics of finance, obtaining a moneylending license in India is not just a legal requirement anymore but a testament to responsible lensing. Operating with certification provides a lot of benefits, such as protection from any potential legal risk. It creates credibility in the eyes of the borrowers, which eventually leads to a larger customer base, access to remedies and even regulatory compliance. More importantly, operating without a license is illegal, and noncompliance with the various state-specified rules and regulations is significant as compliance isn’t just a requirement but a cornerstone of responsible lending. Acquiring a Money lending licence is considered an ethical responsibility as it shows commitment to financial inclusivity, ethical standards and improved economic opportunities.
Yes, any individual/organization who wants to start a Money Lending Business needs to apply for a license from the appropriate authority.
The Money Lending Act states that no money lender shall carry on the business of moneylending except in the area where he has been granted a license. The term used here is “business of moneylending.”
The core principles on which all the banking institutions are based are safety, liquidity, diversity, stability and profitability.
Under the Karnataka Prohibition of Charging Exorbitant Interest Act 2004, no person can charge an interest of more than 18 per cent per annum. Any person who charges interest above this rate is liable for imprisonment for a term extending to three years and a fine extending to Rs 30,000.
These 3 C's of Credit are Character, Capital and Capacity, based on which the lender decides on lending you.
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