LexThe KARNATAKA PROHIBITION OF CHARGING EXORBITANT INTEREST ACT 2004
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THE KARNATAKA PROHIBITION OF CHARGING EXORBITANT
INTEREST ACT 2004
ARRNGEMENT OF SECTIONS
Statement of Object and Reasons
Sections:
1. Short title, extent and commencement
2. Definitions
3. Prohibition of Charging Exorbitant interest and using coercive action
4. Penalty
4A. Power to cancel or suspend Registration
4B. Lending Norms
5. Deposit of money and presentation of petition to court and the procedure thereof
6. Restoration of possession of property
7. Voluntary disclosure
8. Adjustment of interest
9. Abetment of Suicide
10. Court fees
11. Act not to be in derogation to other laws
12. Application of provisions of the Karnataka Money Lenders Act, 1961
13. Deferment of repayment of loan
14. Repeal and Savings
* * * *
I
STATEMENT OF OBJECTS AND REASONS
Act 14 of 2004: It is considered necessary to prohibit the charging of exorbitant
interest by any person, in order to obviate the difficulties experienced by the public
particularly farmere who are falling prey to the people charging exorbitant interest on the
loans. Therefore, it has been decided to prohibit lending money at such an exorbitant interest
and to provide for stringent punishment thereof.
The Bill among other things provides for the following:-
i) prohibition of charging exorbitant interest by a money lender;
ii) penalty for charging exorbitant interest and for molesting or abetting
molestation of any debtor for recovery of loan;
iii) provisions for filling petition to a court by a debtor to seek order recording
satisfaction of loan and interest;
iv) voluntary disclosure by a person charging exorbitant interest by filling a
petition to the court disclosing his intention to charge only the rate fixed
by the Government under sectiion 28 of the Karntaka Money Lenders Act,
1961;
v) adjustment of interest
The farmers in the State are in great difficulty and cases of their suicide on the ground
of indebtedness are being reported daily. It is mainly due to severe draught prevailing in the
State for the third successive year.
Since the matter was urgent and as both the Houses of the State Legislature are not
in session, the Karnataka Prohibition of Charging Exorbitant Interest Ordinance, 2003
(Karnataka Ordinance 6 of 2003) was promulgated to achieve the above object.
This Bill seeks to replace the said Ordinance.
Hence the Bill.
(Obtained from LA Bill No. 14 of 2004 vide File No. SAMVYASHAE 55 SHASANA
2003)
II
Amendment Act 17 of 2025: - It is considered necessary to amend the Karnataka
Prohibition of Charging Exorbitant Interest Act, 2004 (Karnataka Act 14 of 2004) to protect
economically vulnerable groups and individuals from the undue hardship usurious interests
rates and coercive means of recovery by licensed pawn brokers and unlicensed pawn brokers.
Hence, the Bill
[L.A. Bill No. 03 of 2025, File No. SAMVYASHAE 06 SHASANA 2025]
[Entry 30 of List II of the Seventh Schedule to the Constitution of India.]
[Published in Karnataka Gazette Extra-ordinary No.189 in part-IVA dated: 25.03.2025]
* * * *
KARNATAKA ACT NO. 14 OF 2004
(First published in the Karnataka Gazette Extra-ordinary on the Sixth day of March, 2004)
THE KARNATAKA PROHIBITION OF CHARGING EXORBITANT INTEREST ACT, 2004
(Received the assent of the Governor on the Fourth day of March, 2004)
(As amended by Karnataka Act 17 of 2025)
An Act to prohibit the charging of exorbitant interest by any person and matters
incidental thereto.
Whereas, in order to obviate the difficulties experienced by the public at large
who are falling prey to persons charging exorbitant interes t, it is considered necessary to
prohibit lending money for such exorbitant interest and to provide for stringent punishment
thereof and for the purposes hereinafter appearing;
Be it enacted by the Karnataka State Legislature in the Fifty fifth year of the Republic
of India as follows;-
1. Short title, extent and commencement. - (1) This Act may be called the
Karnataka Prohibition of Charging Exorbitant Interest Act, 2004.
(2) It extends to the whole of the State of Karnataka.
(3) It shall be deemed to have come into force on the fifth day of September,
2003.
2. Definitions.- (1) In this Act, unless the context otherwise requires,-
(a) “debtor” means a person who receives loan for exorbitant interest;
(b) “exorbitant interest” means and includes charging of interest on hourly basis,
daily basis, installment basis, monthly basis or in any other form which works out to be an
interest at rate more than that fixed by the State Government under section 28 of the
Karnataka Money Lenders Act, 1961;
(c) "Karnataka Money Lenders Act, 1961" means the Karnataka Money
Lenders Act, 1961 (Karnataka Act 12 of 1961);
(d) “loan” means an advance of money given to a debtor for exorbitant
interest.
(2) Words and expressions used but not defined in this Act shall have the meanings
assigned to them in the Karnataka Money Lenders Act, 1961.
1[3. Prohibition of charging exorbitant interest and using coercive action.- (1) No
person shall charge exorbitant interest on any loan advanced by him.
(2) Money Lender shall not use any coercive action either by himself or by his agents or
by his family members for recovery of money from the debtor and any form of coercive recovery
shall be liable for punishment under the provisions of this Act and empower the Registering
Authority to suspend or cancel the Registration of such Money Lender as provided under the
provisions of this Act.
Explanation: For the purposes of this section, "coercive Action" by a Money Lender
against the debtors include the following, namely:-
(i) exerting pressure or obstructing or using violence to or insulting or intimidating
the debtor or his/her family members, or
(ii) persistently following the debtor , his/her family member from place to place or
interfering with any property owned or used by him/her or depriving him/her of, or
hindering him/her in the use of any such property, or
(iii) frequenting the house or other place where the debtor resides or works, or
carries on business, or happens to be, with an intension of taking coercive
action, or
(iv) using the service of private or outsource or external agencies, criminal
background to negotiate/urging the debtor to make payment using coercive and
undue influence, or
(v) Seeking to take forcibly any document from the debtor which entitles the debtor
to a benefit under any Government programme.]1
1. Substituted by Act 17 of 2025 w.e.f. 25.03.2025
4. Penalty.- Notwithstanding anything contained in the Karnataka Money- Lenders
Act, 1961, whoever contravenes the provision of section 3 or molests or abets the molestation
of any debtor for recovery of any loan shall be punishable with imprisonment for a term which
may extend to 1[ten years]1 and also with fine which may extend to 1[five lakh rupees]1.
1. Substituted by Act 17 of 2025 w.e.f. 25.03.2025
1[4A. Power to cancel or suspend Registration.- (1) The Registering Authority may, at
any time, either suo -motu or upon receipt of complaint by a debtor cancel or recomme nd to
cancel the registration of a Money Lender after hearing and after assigning sufficient reasons in
writing for such cancellation and no order of cancellation of the registration shall be passed
without issuing notice to the Money Lender intimating the facts upon which the prima -facie
decision to cancel the registration has been taken and Money Lender shall be afforded a
reasonable opportunity of being heard against such notice.
Explanation: For the purposes of sub -section (1), conviction of a Money Len der for an
offence of violation of any of the provisions of this Act shall be sufficient cause for cancellation
or recommend to cancellation of his registration.
(2) Pending enquiry under sub -section (1), the Registering Authority may, for sufficient
reasons to be recorded, suspend the registration, of a Money Lender.
4B. Lending Norms.- The Government may, by notification, specify the lending norms,
collection and recovery practices.]1
1. Inserted by Act 17 of 2025 w.e.f. 25.03.2025
5. Deposit of money and presentation of petition to court and the procedure
thereof.- (1) A debtor may deposit the money due in respect of a loan received by him from
any person together with interest at the rate fixed by the State Government under section 28
of the Karnataka Money Lenders Act, 1961 into the Court having jurisdiction, along with a
petition to record that the amount deposited is in full or part, satisfaction of.the loan including
the interest therefor, as the case may be.
(2) The Court shall, on receipt of a petition under sub-section (1), refer a copy of the
petition to the person mentioned in the petition, directing him to give his replies within a period
of fifteen days as may be granted by the Court. The Court may, after due inquiry and after
considering the versions of both the parties, pass orders recording the satisfaction of the loan
and interest therefor in full or in part, as the case may be.
6. Restoration of possession of property. - The Court may, on filing a petition by the
debtor, order the restoration of possession of property whether movable or immovable, if any,
forcibly taken by any person towards repayment of the loan advanced or interest therefor.
7. Voluntary disclosure.- Any person who charges exorbitant interest may, within
one month from the date of publication of this Act, file a petition before the Court disclosing
his intention to charge only the rate fixed by the State Government under section 28 of the
Karnataka Money Lenders Act, 1961, on the loan advanced by him and on such disclosure
the interest in respect of such loan shall be as fixed by the State Government under Section
28 of the Karnataka Money Lenders Act, 1961, and no prosecution for the offenses under this
Act shall be instituted in respect of such loan.
8. Adjustment of Interest. - The Court may, on a petition filed by the debtor for
settlement of loan including the interest therefor, pass an order for the adjustment of the
interest, if any, paid by the debtor, over and above the rate of interest fixed by the State
Government under section 28 of the Karnataka Money Lenders Act, 1961, towards the loan.
9. Abetment of suicide. - Where a debtor or any member of his family commits
suicide and if it is shown that immediately prior to such suicide the debtor or any
member of his family was subjected to molestation by any person, the person who has
advanced loan shall, unless the contrary is proved, be deemed to have abetted the
commission of such suicide,
Explanation: For the purpose of this section, “Member of family” means the spouse,
unmarried daughter or unmarried son.
10. Court fees. - Notwithstanding anything contained in any other law for the time
being in force, the Court fee payable in respect of a petition under this Act shall be rupees
fifty.
11. Act not to be in derogation to other laws.- The provisions of sub-section
(3) of section 28 and sections 38 to 40 of the Karnataka Money Lenders Act, 1961 shall not
apply in respect of offences under this Act. The provisions of this Act shall be in addition to
and not in derogation to the provisions of any other law for the time being in force.
12. Application of provisions of the Karnataka Money Lenders Act, 1961. -
Subject to the provisions of this Act, the provisions of the Karnataka Money Lenders Act,
1961, in so far as they are applicable to money lender s shall mutatis mutandis apply to a
person referred to in section 3 of this Act.
Explanation: Where an act of a person constitutes an offence under this Act and
under the Karnataka Money Lenders Act, 1961, prosecution shall be launched under
this Act.
13. Deferment of repayment of loan. - Notwithstanding anything contained in the
Karnataka Money Lenders Act, 1961, no action to recover a loan against a debtor who is a
farmer or agricultural labourer shall be taken for a period of one year from the date of
commencement of this Act.
14. Repeal and Savings.- (1) The Karnataka Prohibition of Charging Exorbitant
Interest Ordinance, 2003 (Karnataka Ordinance No.6 of 2003) is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the said
Ordinance, shall be deemed to have been done or taken under this Act.
The above translation of ಕರ್ನಾಟಕ ಮಿತಿಮಿೀರಿದ ಬಡ್ಡ ಿ ವಿಧಿಸುವಿಕೆಯ ನಿಷೇಧ ಅಧಿನಿಯಮ, 2004 (2004 ರ
ಕರ್ನಾಟಕ ಅಧಿನಿಯಮ ಸಂಖ್ಯೆ 14) be published in the Official Gazette under clause (3) of Article
348 of the Constitution of India.
* * * *
KARNATAKA ACT NO. 17 OF 2025
(First Published in the Karnataka Gazette Extra-ordinary on the 25th day of March,
2025)
THE KARNATAKA PROHIBITION OF CHARGING EXORBITANT INTEREST
(AMENDMENT) ACT, 2025
(Received the assent of the Governor on the 24th day of March, 2025)
An Act to amend the Karnataka Prohibition of Charging Exorbitant
Interest Act, 2004.
Whereas, it is expedient to amend the Karnataka Prohibition of Charging Exorbitant
Interest Act, 2004 (Karnataka Act 14 of 2004) for the purposes hereinafter appearing;
Be it enacted by the Karnataka State Legislature in the seventy sixth year of the Republic
of India as follows:-
1. Short title, and commencement. - (1) This Act may be called the
Karnataka Prohibition of Charging Exorbitant Interest (Amendment) Act, 2025.
(2) It shall come into force at once.
2. Substitution of section 3. - For section 3 of the Karnataka Prohibition of Charging
Exorbitant Interest Act, 2004 (Karnataka Act 14 of 2004) (hereinafter referred to as the Principal
Act) the following shall be substituted, namely,-
“3. Prohibition of charging exorbitant interest and using coercive
action.- (1) No person shall charge exorbitant interest on any loan advanced by
him.
(2) Money Lender shall not use any coercive action either by himself or by
his agents or by his family members for recovery of money from the debtor and
any form of coercive recovery shall be liable for punishment under the
provisions of this Act and empower the Registering Authority to suspend or
cancel the Registration of such Money Lender as provided under the provisions
of this Act.
Explanation: For the purposes of this section, "coercive Action" by a
Money Lender against the debtors include the following, namely:-
(i) exerting pressure or obstructing or using violence to or insulting
or intimidating the debtor or his/her family members, or
(ii) persistently following the debtor, his/her family member from place
to place or interfering with any property owned or used by him/her
or depriving him/her of, or hindering him/her in the use of any
such property, or
(iii) frequenting the house or other place where the debtor resides or
works, or carries on business, or happens to be, with an intension
of taking coercive action, or
(iv) using the service of private or outsource or external agencies,
criminal background to negotiate/urging the debtor to make
payment using coercive and undue influence, or
(v) Seeking to take forcibly any document from the debtor wh ich
entitles the debtor to a benefit under any Government
programme.”
3. Amendment of section 4.- In section 4 of the Principal Act,-
(a) for the words “three years”, the words “ten years”, shall be
substituted; and
(b) for the words “thirty thousand rupees” the words “five lakh rupees”
shall be substituted.
4. Insertion of new section 4A and 4B. - After section 4 of the Principal
Act, the following shall be inserted, namely:-
“4A. Power to cancel or suspend Registration. - (1) The Registering
Authority may, at any time, either suo -motu or upon receipt of complaint by a
debtor cancel or recommend to cancel the registration of a Money Lender after
hearing and after assigning sufficient reasons in writing for such cancellatio n
and no order of cancellation of the registration shall be passed without issuing
notice to the Money Lender intimating the facts upon which the prima -facie
decision to cancel the registration has been taken and Money Lender shall be
afforded a reasonable opportunity of being heard against such notice.
Explanation: For the purposes of sub -section (1), conviction of a Money
Lender for an offence of violation of any of the provisions of this Act shall be
sufficient cause for cancellation or recommend to canc ellation of his
registration.
(2) Pending enquiry under sub-section (1), the Registering Authority may,
for sufficient reasons to be recorded, suspend the registration, of a Money
Lender.
4B. Lending Norms. - The Government may, by notification, specify the
lending norms, collection and recovery practices.”
The above translation of ಕರ್ನಾಟಕ ಮಿತಿಮಿೀರಿದ ಬಡ್ಡ ಿ ವಿಧಿಸುವಿಕೆಯ ನಿಷೇಧ
(ತಿದ್ದ ು ಪಡ್ಡ) ಅಧಿನಿಯಮ, 2025 (2025 ರ ಕರ್ನಾಟಕ ಅಧಿನಿಯಮ ಸಂಖ್ಯೆ : 17) be published
in the official Gazette under clause (3) of Article 348 of the constitution of
India.
THAAWARCHAND GEHLOT
GOVERNOR OF KARANATAKA
By Order and in the name of
the Governor of Karnataka,
G. SRIDHAR
Secretary to Government
Department of Parliamentary
Affairs and Legislation