1. The State of Karnataka in order to prevent the public from falling prey to the money lenders charging exorbitant interest and harassing the public, has brought an Act prohibiting the charge of exorbitant interest, which is in force from September 2003.

2. That charging of interest on hourly, daily, monthly or on installment basis is prohibited.

3. That whoever charges exorbitant interest or abets molesting any borrower for recovery of the loan is liable to be punished with imprisonment up to three years and also with fine up to Rs. 30,000/-.

4. Further, interest charged in excess of the rate fixed U/s 28 of the Karnataka Money Lenders Act, shall amount to exorbitant interest.

5. Any borrower can file a petition before the concerned court and deposit the money due in respect of the loan received by him together with interest fixed by the State government and obtain discharge of the loan including interest.

6. The court may, after clarifying and consulting the versions of both the borrower as well as the moneylender can pass an order recording the deposit of the loan and interest.

7. Further, if the moneylender has forcibly taken the possession of any movable and / or immovable property, then the borrower can file a petition for restoration of the possession of such property.

8. Under the said Act, if any borrower or member of his family commits suicide because of the moneylender’s molestation, it shall be deemed that the moneylender has abetted with such suicide.


Money Lender
No Court can pass a decree in favour of a Money Lender in any suit unless the Court is satisfied that at the time when the loan was advanced the Money Lender had a valid License.
But if a loan is advanced to a Trader no License is required.