New SOP to punish both sides in money lending business

Staff reporter

A private lender who lends without a license will be considered an offense and punished under the section of the Financial Services Act 2011 under the new standard operating procedure.

The SoP for Adjudication of Private Money Lending Cases 2022 states that courts will now accept all money cases, regardless of loan amount and date.

Bhutan’s Financial Services Act 2011 requires anyone who provides financial services (lending) for business purposes to obtain a license from the relevant authority and charge interest on loans.

Any unlicensed private lender who has charged interest in excess of what is prescribed under Section 17(1)3 of the Kingdom of Bhutan Movable and Immovable Property Act 1999, shall be punished in accordance with Sections 3984 and 3995 of the Usury Act under the Penal Code of Bhutan, 2004.

Persons found guilty of these offenses will be subject to consecutive penalties and the borrower and the lender will be held liable.

However, loans for non-commercial purposes are permitted as long as they do not involve reciprocity in the form of interest leading to business loans.

The offenses would be categorized accordingly by the respective courts based on the seriousness of the offence.

Financial services for non-commercial purposes are interpreted as loans that do not involve the collection of interest for profit. “However, in the civil procedure, if it is brought to the knowledge of the court and then it is proved that interest has been clubbed with the principal amount of the agreement, these cases will be treated as loans for purposes business,” the SOP said.

Some borrowers and their relatives who have been affected by the practice have welcomed the change in justice’s perspective on illegal moneylenders.

“This SOP has caused some unease within the illegal money lending market. But I still hear of people willing to conduct transactions based on fraudulent checks and bills of sale,” an insider said. a borrower.

They called for its strict application. “Illegal money lenders need to realize that they too will be held accountable according to the laws in force in the country.

They said they hoped this SOP would discourage money lenders from abusing the police and courts in their illegal activities, and perhaps even opting for a legal source of income or investment.

“The SOP is a step in the right direction and a victory for the rule of law,” said another. “It finally evens out the scales of justice for private money lending cases. However, it remains to be seen whether he will succeed in convincing local loan sharks to become legal money lenders.

He said that legislation was needed to regulate this market. Parliament should consider money lending legislation that meets the requirements of both parties to minimize the negative socio-economic effects of this activity.

“We don’t have concrete information on how this black market harms our communities and affects the financial system. But based on my own experience and that of others, I think the damage is significant enough not to be ignored,” he said.

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