Be it farmer suicides in Andhra Pradesh or debt ridden families in Vidharba the finger has often been pointed at money lenders who squeeze rural India.The Reserve Bank of India (RBI) is now attempting to regulate them by recommending a model law to states.
For starters, the RBI has asked states to make it mandatory for moneylenders to register with the state and introduce stringent penalties for unregistered moneylenders. In addition, states have been asked to set a maximum rate of interest which all money lenders must adhere to.These rates will differ from state to state and will be calculated based on the cost of funds and the cost involved in deploying those funds. However the RBI has made it clear that this interest rate cap would only be applicable to money lenders and not NBFC or micro finance institutions.
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