The KARNATAKA MONEY-LENDERS ACT, 1961

 
THE KARNATAKA MONEY-LENDERS ACT, 1961 
ARRANGEMENT OF SECTIONS 
Statement of Objects and Reasons 
Sections: 
1. Short title, extent and commencement. 
2. Definitions. 
3. Appointment of Registrar General, Registrars and Assistant Registrars. 
4. Register of money-lenders. 
5. Money-lenders to obtain licence. 
6. Application for licence. 
7. Grant of licence and entry in register.  
7A. Conditions of licence. 
7B. Forfeiture of security. 
8. Refusal of issue of licence. 
9. Registrar‟s power to cancel licences.  
9A. Repayment of Security Deposit. 
10. Term of licence. 
11. Suits by money-lenders not holding licence. 
12. Omitted. 
13. Application for cancellation of licence. 
14. Registrar and Assistant Registrar to have powers of Civil Court. 
15. Power of authorised officer to require production of records or documents and power 
of entry, inspection and seizure. 
15A Settlement of disputes by Ombudsperson 
15B  Grievances Redressal Forum 
16. Court‟s power to cancel or suspend a licence. 
17. No compensation for suspension or cancellation of licence. 
18. Persons debarred from doing business during period of suspension or cancellation of 
licence. 
19. Person whose licence is suspended or cancelled not to apply without giving 
particulars of endorsement or of disqualification. 
20. Duty of money-lender to keep accounts and furnish copies. 
21. Delivery of statement of accounts and copies thereof by money-lender. 
22. Fees for certain statements supplied to debtors and Assistant Registrars. 
23. Debtors not bound to admit correctness of accounts. 
24. Procedure of court in suits regarding loans. 
25. Provisions of certain sections not to apply to loans made by company or 
unincorporated body exempted by Government. 
26. Power of Court to limit interest recoverable in certain cases. 
 
27. Power of Court to direct payment of decretal amount by installments. 
 
28. Limitation on rates of interest. 
29. Prohibition of charges for expenses on loans by money-lenders. 
30. Notice and information to be given on assignment of loan. 
31. Application of Act as respects assignees. 
32. Reopening of transactions. 
33. Inquiry for taking accounts and declaring the amount due. 
34. Deposit in Court of money due to money-lender. 
35. When interest to be paid for entire month. 
36. Money-lenders to exhibit their names over shops. 
37. Entry of wrong sum in bond, etc., to be an offence. 
38. Penalty for molestation.   
38A  Prohibition of using coercive action 
39. General provision regarding penalties. 
40. Offences by Hindu joint family, Corporation, etc. 
41. Certain offences to be cognizable. 
42. Every officer to be public servant. 
43. Saving of laws relating to agriculturists‟ indebtedness. 
44. Rules. 
45. Repeal and savings. 
* * * * 
 
STATEMENT OF OBJECTS AND REASONS  
 I 
Act 12 of 1962. - At present five different Acts are in force on money -lenders and 
money-lending in different regions of the State. These  Acts are not equal in scope. It 
has become necessary to have an Act applicable to the entire State and with sufficient  
provisions not only to regulate and control the money -lending transactions effections  
effectively but to afford sufficient protection to  innocent debtors. The Mysore Money - 
lenders Bill, 1958 seeks to achieve this object. 
Some of the main features of the Bill are:- 
(i) licensing of money-lenders; 
(ii) requiring money-lenders to keep and furnish prescribed accounts; 
(iii) empowering of courts to direct payment of decretal amount by installments; 
(iv) loans to or by a  bank, by a co-operative society, insurance company, local 
authority authorised by Government and other types of loans specified in clause 2(9) 
are excluded from the purview of the Act. 
(Published in the Karnataka Gazette (Extraordinary) Part IV-2A dated 26th March 1959) 
  
 
II 
Amending Act 77 of 1976. —With a view to further restricting the usurious 
practices of money lending it has become imperative to plug certain inadequacies in 
the existing Act, and also to provide the Executive Officers with sufficient powers to 
enforce the provisions of the Act, besides providing deterrent penalties for the 
infringement of the Act. 
Accordingly the present facility available under section 11 of the Act enabling 
Courts to give permission to unlicenced money lenders to obtain licences and 
thereafter to proceed with their suits for the recovery of dues is now done away with 
under the amended provisions. 
Secondly section 15 has been substituted empowering the authori sed officers 
under the Act to enter the premises where the business of money lending is carried on 
and to call upon the money lenders to produce the required records and if  need be to 
search the premises and seize any record and documents as may be necessary. 
Thirdly the penalties under the Act have been enhanced both by way of fine and  
imprisonment to create a deterrent impact on the undesirable money lending practices. 
Hence the Bill. 
(Obtained from L.A. Bill No.59 of 1976) 
III 
Amending Act 41 of 1985. —The persons who borrow money from the licensed  
money lenders pledge costly gold ornaments and other articles with them. 
To safeguard the interests of these borrowers it is proposed to insist on a security  
deposit in a Government Treasury from such licensed  money lenders, and to make a  
security deposit a condition precendent for granting license in future. 
In view of the voluminous work in the Administration of the Act, it is also proposed 
to increase the license fee. 
As the matter was very urgent, the Karnataka Money Lenders (Amendment) 
Ordinance, 1985 (Karnataka Ordinance No. 11 of 1985) was issued. 
This Bill seeks to replace the said ordinance. 
(Published in the Karnataka Gazette (Extraordinary) Part IV -2A, dated 25th July 
1985 as No. 399 at page. 6.) 
IV 
Amending Act 2 of 1987.—It is considered necessary to exclude certain Banking  
and financial institutions from the purview of the definition of the Money Lender under 
the Karnataka Money Lenders Act, 1961. 
The existing provisions of the Act provide for the licensee to maintain his books of  
accounts in any recognised language. It is proposed to make it obligatory to keep such 
accounts either in Kannada or in English language. 
For the above purpose an Ordinance was promulgated. This Bill seeks to replace 
the said Ordinance. 
(Published in the Karnataka Gazette (Extraordinary) Part IV-2A, dated 4th February 
1987 as No. 97 at page 4.) 
 
 
V 
Amending Act 14 of 1998. —It is considered necessary to amend the Karnataka  
Money Lenders Act, 1961 (Karnataka Act 12 of 1962) for the following reasons, 
namely:— 
 
(i) to enhance the period of licence from one year to five years; 
(ii) to enhance the licence fee from Rs. 100-00 per year to Rs. 5000.00 for the term 
of licence. 
(iii) to enhance the licence fee for additional place of business from Rs. 50.00 
per year to Rs. 2500.00 for the term of licence; 
(iv) to provide for refund of security deposit in the event to cancellation of licence. 
(v) since, the Karnataka High Court in Writ Petition No. 8912/85 and other 
connected matters directed the Government to pay interest on security deposit 
as there is no  specific provision prohibiting payment of interest, appropriate 
provisions are made to remove the lacuna retrospectively from 31st May 1985, 
and to validate the action. 
Hence the Bill. 
(Obtained from file SAMVYASHAE 19 SHASANA 94.) 
 
 
VI 
 
Amending Act 12 of 2021.- It is considered necessary to amend sections 38 and 39 
of the Karnataka Money Lenders Act, 1961(Karnataka Act 12 of 1962) to enhance the 
penalty amount and conviction term in order to ensure strict adherence to the provisions of 
the Act. 
Hence, the Bill. 
 
[L.A. Bill No. 14 of 2021, File No. Samvyashae 11 Shasana 2021] 
[Entry 30 of List II of the Seventh Schedule to the Constitution of 
India.] 
[Published in Karnataka Gazette Extra-ordinary No. 305 in part-IVA dated: 26.03.2021] 
 
VII 
 
Amendment Act 16 of 2025: - It is considered necessary to amend the Karnataka Money 
Lenders Act, 1961 (Karnataka Act 12 of 1962) to protect economically vulnerable groups and individuals 
from the undue hardship usurious interests rates and coercive means of recovery by licensed money 
lender and unlicensed money lender. 
 Hence, the Bill 
[L.A. Bill No. 04 of 2025, File No. SAMVYASHAE 05 SHASANA 2025]  
[Entry 30 of List II of the Seventh Schedule to the Constitution of India.]   
[Published in Karnataka Gazette Extra -ordinary No.192 in part -IVA dated: 25.03.2025]
 
 
 
1[KARNATAKA ACT]1 No. 12 OF 1962 
(First published in the 1[Karnataka Gazette]1 on the Twenty-ninth day of March, 
1962.) 
 
THE 1[KARNATAKA]1 MONEY-LENDERS ACT, 1961. 
(Received the assent of the President on the Eighth day of March, 1962.) 
(As amended by Karnataka Acts 77 of 1976, 41 of 1985, 2 of 1987, 14 of 1998, 12 of 2021 
and 16 of 2025.) 
 
An Act to regulate the transactions of money -lending in the 1[State of 
Karnataka]1. 
WHEREAS it is expedient to make better provision for the regulation and control 
of transactions of money-lending in the 1[State of Karnataka]1; 
BE it enacted by the 1[Karnataka State]1 Legislature in the Twelfth Year of the  
Republic of India as follows:— 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
1. Short title, extent and commencement.— (1) This Act  may be called the 
1[Karnataka]1 Money-lenders Act, 1961. 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(2) It extends to the whole of the 1[State of Karnataka]1. 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(3) It shall come into force on such 2[date]2 as the State Government may 
by  notification, appoint. 
1. This Act has come into force on 1.4.1965 by Notification Text of the Notification is at the end of the Act. 
2. Definitions.— In this Act, unless the context otherwise requires,— 
1[(1) “bank” means,- 
(i) a banking company to which the Banking Regulation Act, 1949 (Central 
Act 10 of 1949) applies; 
(ii) the State Bank of India constituted under the State Bank of India Act, 
1955 (Central Act 23 of 1955); 
(iii) a subsidiary bank defined in clause (k) of section 2 of the State Bank of 
India (Subsidiary Banks) Act, 1959 (Central Act 38 of 1959); 
(iv) a corresponding new bank constituted under section 3 of the Banking 
Companies (Acquisition and Transfer of Undertakings) Act, 1970  (Central Act 5 of 
1970); 
(v) a regional rural bank established under the Regional Rural Banks Act, 
1976 (Central Act 21 of 1976); 
(vi) a corresponding new bank constituted under section 3 of the Banking 
Companies (Acquisition and Transfer of Undertakings) Act, 1980 (Central Act 40 of  
1980); 
(vii) the Industrial Development Bank of India established under the 
 
Industrial Development Bank of India Act, 1964 (Central Act 18 of 1964); 
(viii) the National Bank for Agriculture and Rural Development established under  
the National Bank for Agriculture and Rural De velopment Act, 1981 (Central Act 61 of  
1981); 
(ix) the Export Import Bank of India established under the Export Import Bank 
of India Act, 1981 (Central Act 11 of 1959);”. 
(x) the Industrial Finance Corporation of India established under the 
Industrial Finance Corporation of India Act, 1948 (Central Act 15 of 1948); 
(xi) State Financial Corporations established under the State 
Financial Corporation, Act, 1951 (Central Act 63 of 1951); 
2[(xii) the Industrial Reconstruction Bank of India established under the 
Industrial Reconstruction Bank of India Act, 1984 (Central Act 62 of 1984);]2 
(xiii) the Industrial Credit and Investment Corporation  of India  Limited, a  
company incorporated under the Indian Companies  Act, 1913 (Central Act 7 of 
1913).]1 
1. Substituted by Act 41 of 1985 w.e.f. 31.5.1985. 
2. Substituted by Act 2 of 1987 w.e.f. 16.10.1986. 
1[(xiv) the Agricultural Finance  Corporation Limited a company incorporated under the 
Companies Act, 1956;]1 
1. Inserted by Act 2 of 1987 w.e.f. 16.10.1986. 
(2) “business of money-lending” means the business of advancing loans whether 
or not in connection with or in addition to any other business; 
(3) “capital” means a sum of money which a money-lender invests in the business 
of money-lending; 
(4) “company” means a company as defined in the Companies Act, 1956 (Central 
Act 1 of 1956); 
(5) “co-operative society” means a society registered or deemed to have been 
registered under the 1[Karnataka]1 Co-operative Societies Act, 1959 ( 1[Karnataka]1 Act 
11 of 1959); 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(6) “interest” includes the return to be made over and above what was actually lent, 
whether the same is charged or sought to be recovered specifically by way of interest 
or otherwise, but does not include any sum lawfully charged by a money-lender for or 
on account of costs, charges or expenses in accordance with the provisions of this 
Act, or any other law for the time being in force; 
(7) “licence” means a licence granted under this Act; 
(8) “licence fee” means the fee payable in respect of a licence; 
(9) “loan” means an advance at interest whether of money or in kind,  and includes 
any transaction which the Court finds in substance to amount to such an advance, but  
does not include,- 
(a) a deposit of money or other property in a Government  Post Office Bank or in 
a 1[Karnataka Government Savings Bank] 1 or in any other bank or in a company or with a 
co- operative society; 
 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(b) a loan to, or by, or a deposit with, any society or association registered under 
the 1[Karnataka]1 Societies Registration Act, 1960 (1[Karnataka]1 Act 17 of 1960); 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(c) a loan advanced by Government or by any local authority authorised by 
Government; 
(d) a loan advanced by a co-operative society; 
(e) an advance made to a subscriber to, or a depositor in, a Provident Fund 
from the amount standing to his credit in the fund in accordance with the rules of the 
fund; 
(f) a loan to or by an ins urance company as defined in the Insurance Act, 1938  
(Central Act IV of 1938); 
(g) a loan to or by a bank; 
(h) an advance of not less than three thousand rupees made on the basis of a  
negotiable instrument as defined in the Negotiable Instruments Act, 1881 (Central Act 
XXVI of 1881) other than on the basis of a promissory note; 
(i) except for the purposes of sections 26 and 28,— 
(i) a loan to a trader; 
(ii) a loan to a money-lender who holds a valid licence; or 
(iii) a loan by a landlord to his tenant for financing of crops or  seasonal 
finance of not more than fifty rupees per acre of land held by the tenant; 
(10) “money-lender” means,- 
(i) an individual; or 
(ii) an undivided Hindu family; or 
(iii) a company; or 
(iv) an unincorporated body of 
individuals; who or which,- 
(a) carries on the business of money-lending in the State; or 
(b) has his or its principal place of such business in the State, but shall not 
include a bank 1[or any other financial institution which the State Government may, by 
notification specify in this behalf]1; 
1. Inserted by Act 2 of 1987 w.e.f. 16.10.1986. 
(11) “notification” means a notification published in the official Gazette; 
(12) “prescribed” means prescribed by rules made under this Act; 
(13) “principal” means in relation to a loan, the advance actually made to the debtor; 
(14) “Provident Fund” means a Provident Fund as defined in the Provident Funds 
Act, 1925 (Central Act XIX of 1925), and includes a Government Provident Fund and a  
Railway Provident Fund as defined in the said Act; 
(15) “recognised language” means the language of the Court; 
(16) “register” means a register of money-lenders maintained under section 4; 
(17) “rules” means rules made under this Act; 
(18) “State” means the 1[State of Karnataka]1; 
 
1. Adapted by the Karnataka Adaptations of Laws Order, 1973 w.e.f. 1.11.1973 
(19) “suit to which this Act applies” means any suit or proceeding,- 
(a) for the recovery of a loan made after the date on which this Act comes into 
force; 
(b) for the enforcement of any security taken, or any agreement made after the 
date on which this Act comes into force in respect of any loan made either before or 
after the said date; or 
(c) for the redemption of any security given after the date on which this Act 
comes into force in respect of any loan made either before or after the said date; 
(20) “trader” means a person who in the regular course of business buys and 
sells goods or other property, whether movable or immovable, and includes,- 
a wholesale or retail 
merchant, a commission 
agent, 
a broker, 
a 
manufacturer
, a contractor, 
a factory owner, 
-but does not include an artisan or a person who sells his agricultural produce or 
cattle or buys agricultural produce or cattle for his use. 
Explanation.—For the purposes of this clause an “artisan” means a person who 
does not employ more than ten workers in a manufacturing process on any one day of 
the twelve months immediately preceding. 
1[(21) „Year‟ means the year commencing on the first day of April;]1 
1. Inserted by Act 14 of 1998 w.e.f. 22.5.1998. 
3. Appointment of Registrar General, Registrars and Assistant Registrars. —
The State Government may, by notification, appoint a Registrar General, Registrars 
and Assistant Registrars of Money-lenders for the purposes of this Act and may define 
the areas within which each such officer shall exercise his powers and  perform his 
duties. 
4. Register of money -lenders.— Every Assistant Registrar shall maintain for 
the area in his  jurisdiction a register of money-lenders in such  form as may be 
prescribed. 
5. Money-lenders to obtain licence. — No person shall carry on t he business of  
money-lending in the State except  1[under and]1 in accordance  with the  terms and 
conditions of a licence 2[and, after the commencement of the Karnataka Money 
Lenders (Amendment) Act, 1985, except on payment of security deposit as provided 
in section 7A]2. 
1. Inserted by Act 77 of 1976 w.e.f. 27.10.1976. 
2. Inserted by Act 41 of 1985 w.e.f. 31.5.1985. 
6. Application for licence. — (1) Every money -lender shall 1[x x x] 1 before such 
date as may be prescribed make an application in the prescribed form for the grant of 
 
a licence to the Assistant Registrar of  the area within the limits of  which the place 
where he intends to carry on the business of money -lending, or if he intends to carry 
on such business at more than one place in the area, the principal place of such 
business, is  situated. Such application shall contain  the following particulars, 
namely:— 
1. Omitted by Act 14 of 1998 w.e.f. 22.5.1998. 
(a) the name in which such money-lender intends to carry on business and 
the name of the person proposed to be responsible for the management of the 
business; 
(b) if the application is by or on behalf of,- 
(i) an individual, the name and address of such individual 
(ii) an undivided Hindu family, the names and addresses of the manager or 
the karnavan or the yajaman and the adult coparceners of such family; 
(iii) a company, the names and addresses of the directors, and of the manager or  
principal officer managing it; 
(iv) an unincorporated body of individuals, the names and addresses of such 
individuals; 
(c) the area and the place or principal place of the business of money -lending in 
the State; 
(d) the name of any other place in the State where the business of money -
lending is carried on or intended to be carried on; 
(e) whether the person signing the application has himself or any of the adult  
coparceners of an undivided Hindu family, or any director, manager or principal officer 
of the company or any member of the unincorporated body on behalf of which such 
application has been made, as the case may be, has carried on the business of 
money- lending in the State in the year ending 1[on the 31st day of March]1 
immediately preceding the date of the application either individually, or in partnership, 
or jointly with  any other coparcener or any other person and whether in the same or 
any other name; 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
(f) the total amount of the capital which such person intends to invest in the  
business of money-lending in the year for which the application has been made; 
(g) if the places at which the business of money -lending is to be carried on are  
more than one, the names of persons who shall be in the management of the 
business at each such place. 
(2) The application shall be in writing and shall be signed,— 
(a)(i) if the application is made by an individual, by the individual; 
(ii) if the application is made on behalf of an undivided Hindu family, by 
the manager or the karnavan or the yajaman, as the case may be, of such family; 
(iii) if the application is made by a company or unincorporated body, by the  
managing director or any other person having control of its principal place of business 
in the territory of India or of its place of business in the area in which it intends to carry 
on the business; or 
(b) by an agent authorised in this behalf by a power-of-attorney by the individual 
 
money-lender himself or the family, or the company or the unincorporated body, as the 
case may be. 
(3) The application shall also contain such other particulars as may be prescribed. 
(4) The application shall be accompanied by a licence fee at the following rates:— 
(a) if the place at which the business of 1[five thousand rupees]1;  
money- lending is to be carried on is 
not more than one. 
 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
1[five thousand rupees]1 for the (b) if the business of money-lending is to 
be carried on at more than one place principal place of business and 
within the limits of the area of the 1 [rupees two thousand five 
hundred 1 for each of the other ] Registrar. 
 places in the area: 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
 
Provided that  where an application is  made after the expiry of  the period 
prescribed by rules in respect of  such application, it shall be accompanied by a 
licence fee at double the rates specified above. 
(5) The fee payable under this section shall be paid in the manner prescribed and  
shall not be refunded, notwithstanding the fact that the grant of the licence is refused 
or the application is withdrawn. 
7. Grant of licence and entry in register.— (1) On receipt of an application under 
section 6 and after making a summary inquiry in accordance with the prescribed 
procedure, the Assistant Registrar shall forward the application, together with his 
report, to the Registrar. The Registrar may after making such further inquiry, if any, as 
he deems fit, grant the applicant a licence in such form and 1[subject to the conditions 
specified in section 7A and such other conditions] 1 as may be prescribed, and direct 
the Assistant Registrar to enter the  name of such applicant in the register maintained 
by him under section 4. 
1. Substituted by Act 41 of 1985 w.e.f. 31.5.1985. 
If the application is in respect of more than one place of business in the area 
under the jurisdiction of the Registrar, a separate licence in respect of each such place 
shall be  granted in the name of the applicant and the person responsible for the 
management of the business at such place. 
(2) If the application also contains a request for the grant of a licence to carry on 
the business of money-lending at any place within the State, but at a place outside the 
jurisdiction of the Registrar who granted the licence in respect of the principal place of  
business of the money-lender, the Registrar shall forward copies of the application 
and of the licence granted to the Registrar having jurisdiction who may grant a licence 
on payment of the licence fee provided for in section 6 without making any inquiry in 
respect of the application. 
1[7A. Conditions of licence.— 1[(1) Every money lender applying for grant of a licence 
under section 7 for the first time or for grant of a fresh licence under that section for the  
succeeding term, shall  at the  time of making  such application, pay security deposit as  
provided in sub-section (2).]1 
 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
(2) Every licensee specified in column (2) of the Table below shall, in the 
prescribed manner, deposit in the Government Treasury the amount specified in the 
corresponding entry in column (3) of the said Table by way of securit y for the due 
observance of the conditions of the licence. 
TABLE 
1 2 3 
(1) A licensee who 1[invests]1 less than one lakh  
 rupees in a year. Five thousand rupees. 
(2) A licensee who 1[invests]1 one lakh rupees  
 and above and less than five lakh rupees Ten thousand rupees. 
 in a year.  
(3) A licensee who 1[invests]1 five lakh rupees  
 and above but less than ten lakh rupees Twentyfive thousand 
 in a year. rupees. 
(4) A licensee who 1[invests]1 ten lakh rupees  
 and above in a year. Fifty thousand rupees. 
 
(3) For the purposes of sub -section (2), the amount of the security payable in a 
year by a licensee shall be determined on the basis of the 1[the amount invested by 
him in the  business during the previous  year]1 2[and such  security deposit  shall not  
carry any interest]2: 
 
Provided that in the case of a new licensee or a person who was a licensee only for 
a portion of the preceding year the amount of security shall be determined on the 
basis of a declaration in the prescribed form as to the amount which he is likely to  
1[invest]1 during the year, filed before the Registrar in the prescribed manner. 
 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
2. Inserted by Act 14 of 1998 w.e.f.. 31-5-1985 
7B. Forfeiture of security. — (1) The Registrar may, at any  time, by order in 
writing, forfeit to the Government the whole or any portion of the security furnished 
under sub- section (2) of section 7A, if the licensee,— 
(a) carries on the business of money lending in contravention of any provisions 
of this Act or the rules made thereunder or the conditions of the licence; or 
(b) is convicted of an offence under section 27 or section 38 or section 39 or 
section 40; or 
(c) maintains false accounts. 
(2) Before forfeiting to the Government the whole  or any portion of the security  
deposit made under sub -section (1), the Registrar shall give the licensee a notice in  
writing stating the grounds on which it is proposed to take action and requiring him to  
show cause against it within such time as may be specified in the notice. 
(3) Every order of the Registrar under this section shall be communicated to 
the licensee in such manner as may be prescribed. 
(4) Any person aggrieved by an order under sub-section (1), may within a period of 
 
one month from the date on which the order was communicated to him, prefer an 
appeal to the Registrar General whose decision shall be final. 
(5) The Registrar may, out of the amount forfeited, direct payment of such amounts 
and at such rates as may be prescribed to the borrowers affected by the acts of the  
licensee.]1 
1. Sections 7A and 7B Inserted by Act 41 of 1985 w.e.f. 31.5.1985. 
8. Refusal of  issue of licence.— (1) The grant of licence shall not be refused 
except on any of the following grounds:— 
(a) that the applicant, or any person responsible or proposed to be responsible  for 
the management of his business as a money-lender, is disqualified by an order under 
section 16 from holding a licence; 
(b) that the applicant has not complied with the provisions of this Act or the rules in  
respect of an application for the grant of a licence; 
(c) that the applicant has made wilful default in complying with or knowingly acted in 
contravention of any requirements of this Act; 
(d) that satisfactory evidence has been produced that the applicant or any person  
responsible or proposed to be responsible for the management of his business of 
money-lending has,- 
(i) knowingly participated in or connived at any fraud or dishonesty in the conduct 
of or in connection with the business of money-lending, or 
(ii) been found guilty of an offence under Chapter XVII or Chapter XVIII of the 
Indian Penal Code. 
(2) The Registrar shall, before refusing a licence under sub -section (1), record 
the evidence adduced before him and his reasons for such refusal. 
(3) An appeal shall lie fro m an order of the Registrar refusing a licence under 
sub- section (1), to the Registrar General whose decision shall be final. 
9. Registrar’s power to cancel licences.— (1) The Registrar may, during the term 
of any licence, cancel the same by an order in writing on the ground that the person to  
whom it was granted has been guilty of any act or conduct for which he might under  
section 8 have refused him the grant of the licence and which act or conduct was not  
brought to his notice at the time of the grant of licence. 
(2) Before cancelling a licence under sub-section (1), the Registrar shall give notice 
in writing to the licensee and may hold such inquiry as may be necessary. 
(3) An appeal shall lie from an order of the Registrar cancelling a licence under 
sub- section (1), to the Registrar General whose decision thereon shall be final. 
1[9A. Repayment of Security Deposit. — Where a licence has been cancelled by the  
Registrar, he shall by order in writing refund the security deposit paid but not forfeited 
under section 7B, to the person whose licence has been so cancelled.]1 
1. Inserted by Act 14 of 1998 w.e.f. 22.5.1998. 
10. Term of licence.— A licence shall be valid 1[for a term of  2[three years]2 ]1: 
Provided that where a money -lender holding a licence has made an application for 
a fresh licence before the date prescribed under sub -section (1) of section 6, for the  
succeeding 1[term]1, such money-lender shall, notwithstanding the expiry of the term of 
 
his licence, be deemed to have a valid licence  until orders are received by him on his  
application for the fresh licence. 
1. Substituted by Act 14 of 1998 w.e.f. 22.5.1998. 
2. Substituted by Act 16 of 2025 w.e.f 25.03.2025. 
1[Explanation.—Where a licence  has been granted in the middle of  a year, for  the 
purpose of computing the term of licence, the remaining part of the year shall be deemed 
to be a year.]1 
1. Inserted by Act 14 of 1998 w.e.f. 22.5.1998. 
11. 2[x x x]2 suits by money-lenders not holding licence.— (1) After the expiry of six 
months from the date on which this Act comes into force, no Court shall pass a decree in  
favour of a money-lender in any suit to  which this Act applies, filed  by a money -lender, 
unless the Court is satisfied that at the time when the loan or any part thereof to which the 
suit relates was advanced, 1[and on the date such suit was filed] 1 the money-lender 
held a valid licence. 
1. Inserted by Act 77 of 1976 w.e.f. 27.10.1976. 
2. Omitted by Act 77 of 1976 w.e.f. 27.10.1976. 
1[(2) x x x 
(3) x x x 
(4) x x x ]1 
1. Omitted by Act 77 of 1976 w.e.f. 27.10.1976. 
(5) Nothing in this section shall affect— 
(a) suits in respect of loans advanced by a money -lender before the date on 
which this Act comes into force; 
(b) the powers of an official receiver, an administrator or a Court under the 
provisions of the Mysore Insolvency Act, 1925, or other corresponding law in force in 
any area of the State, or of a liquidator under the Companies Act, 1956, to realise the  
property of a money-lender. 
1[12. x x x]1 
1. Omitted by Act 77 of 1976 w.e.f. 27.10.1976. 
13. Application for cancellation of licence.— (1) Any person may, during the 
currency of a licence, file an application, to the Registrar for the cancellation of the  
licence issued to a money -lender on the ground that such money -lender has b een 
guilty of any act or conduct for which the Registrar may under section 8 refuse him the 
grant of a licence. At the time of filing his application the said person shall deposit such 
amount not exceeding one hundred rupees as the Registrar may direct. 
(2) On the receipt of such application and deposit, the Registrar shall hold an 
inquiry and if he is satisfied that  the money -lender has been guilty of  such act or 
conduct he may cancel the licence of the money-lender and may also direct the return 
of the deposit made under sub-section (1). 
(3) If in the opinion of the Registrar, an application made under sub -section (1) is  
frivolous or vexatious, he may, out of the deposit made under sub -section (1), direct 
to be paid to the money-lender such amount as he deems fit as compensation. 
(4) Any person aggrieved by an order of the Registrar under sub -section (2) or (3)  
 
may, within such time and on payment of such fee as may be prescribed, appeal to 
the Registrar General and the order of the Registrar General on such appeal shall be 
final. 
14. Registrar and Assistant Registrar to have powers of Civil Court. — For the 
purposes of sections 7 and 13, the Registrar and Assistant Registrar shall have and 
may exercise the same powers as are vested in a Civil Court under the Code of Civil 
Procedure, 1908, in respect of the following matters:— 
(a) enforcing the attendance of any person and examining him on oath; 
(b) compelling the production of documents and material objects; 
(c) issuing commissions for the examination of witnesses; and 
(d) proof of facts by affidavits. 
1[15. Power of authorised officer to require production of records or documents 
and power of entry, inspection and seizure— (1) The Registrar, Assistant Registrar or 
any Officer authorised by the State Government in this behalf may, for the purpose of  
verifying whether the business of money -lending is carried on in accordance with the  
provisions of this Act, enter the premises of the money lender or any person who in his 
opinion is carrying on the business of money-lending and call upon him to produce any 
record or document relating to such business and every such money lender or person  
shall allow such inspection and produce such record or document. 
(2) The Registrar, Assistant Registrar or the  other officer referred to in sub -section 
(1) may, for the purposes of the said sub -section, search the premises and seize any 
record and document as may be necessary. The record or document seized shall be 
retained only for such period as may be necessary  for the purposes of examination, 
prosecution or other legal action: 
Provided that the provisions of sections 100 and 102 of the Code of Criminal 
Procedure, 1973 (Central Act 2 of 1974) shall, so far as may be, apply to such search  
and seizure: 
Provided further that for every record or document seized, appropriate 
acknowledgement shall be given to the person from whose custody it is seized. 
(3) The Registrar, Assistant Registrar or the other officer referred to in sub -section 
(1) shall also have power to summon  and examine the money lender or any person 
who in his opinion is in a position to furnish relevant information.]1 
1. Substituted by Act 77 of 1976 w.e.f. 27.10.1976. 
 
1[(4) The Group B Officer of Revenue Department or Rural Development and 
Panchayath Raj Department or Urban Development Department or Town Planning Department 
or Woman and Child Development Department or Social Welfare Department or Minority 
Welfare Department or Tribal Welfare Department or Backward Classes Welfare Department  
shall repo rt if any person is in contravention of the provisions of this Act and the Karnataka 
Prohibition of Charging Exorbitant Interest Act, 2004 (Karnataka Act 14 of 2004) to  the 
 
concerned Registrar, Assistant Registrar or any Officer authorized by the State Go vernment, in 
this behalf. 
(5) The Registrar, the Assistant Registrar or any Officer authorized may on his own 
motion or on the report submitted by the Officers referred in sub -section (1), shall take action 
under the  provisions of this Act.]1 
1. Inserted by Act 16 of 2025 w.e.f 25.03.2025. 
1[15-A. Settlement of disputes by Ombudsperson. - The Government shall by 
notification appoint an Ombudsperson who can act as a mediator between the borrower or 
lender, for settling the disputes. The procedure and guidelines for the settlement and mediation 
shall be in the manner as may be prescribed. 
15-B. Grievances Redressal Forum. - The Government shall  establish suitable 
grievance mechanism. The procedure and guidelines for grievance mechanism shall be in the 
manner as may be prescribed.]1 
1. Inserted by Act 16 of 2025 w.e.f 25.03.2025. 
 
16. Court’s power to cancel or suspend a licence. — (1) (i) A Court passing an  
order of conviction against a money-lender for an offence under this Act, or (ii) a Court 
trying a suit to which this Act applies, if satisfied that such money -lender has 
committed such contravention of any provision of this Act or the rules as would, in its 
opinion, make him unfit to carry on the business of money-lending,— 
(a) may order that all the licences  held by such money -lender in the State be  
cancelled or suspended for such period as it may think fit; and 
(b) may, if it thinks fit, declare any such money -lender, or if any money-lender is 
an undivided Hindu family, a company or an unincorporated body, such family, 
company or  body and also any person responsible for the management of the 
business of money - lending carried on by such family, company or body, to be 
disqualified from holding any licence in the State for such time as the Court may think 
fit: 
Provided that no order or declaration shall be made under this sub-section unless a 
reasonable opportunity has been given to the person concerned to show cause 
against the order or declaration proposed to be made. 
(2) Where a Court convicts a money -lender of an offence under this Act, or makes 
an order or declaration under clause (a) or (b) of sub-section (1), it shall cause the 
particulars of the conviction, order or declaration, as the case may be, to be endorsed 
on all the licences held by the money-lender convicted or by any other person affected 
by the order or declaration and shall cause copies of its order or declaration to be 
sent to the Registrars by whom the licences were granted, for the purpose of entering 
such particulars in the registers: 
Provided that where any licence held by any money -lender is suspended or 
cancelled or any  money-lender is disqualified  from holding any licence under this  
 
section he may appeal against such order to the Court to which an appeal ordinarily 
lies from the decision of the Court passing the order; and the Court which passed the 
order or the Court of appeal may, if it thinks fit, pending the appeal, stay the operation 
of the order under this section. 
(3) Any licence required by a Court for endorsement in accordance with sub-section 
(2) shall be produced by the person by whom it is held in such manner and within such 
time as may be directed by the Court and any person who, without reasonable cause,  
makes default in producing the licence so required shall be liable, on conviction, to a 
fine which may extend to five hundred rupees for each day of the period during which 
the default continues. 
(4) Powers conferred on a Court under this section may be exercised by any Court 
in appeal or in revision. 
17. No compensation for s uspension or cancellation of licence. — Where any 
licence is suspended or cancelled under this Act, no person shall be entitled to any  
compensation or the refund of any licence fee. 
18. Persons debarred from doing business during period of suspension or 
cancellation of licence.—  A person whose licence has been suspended or cancelled 
in accordance with the provisions of this Act shall not during the period of suspension 
or cancellation, as the case may be, carry on the business of  money-lending in the 
State. 
19. Person whose licence is suspended or cancelled not to apply without 
giving particulars of endorsement or of disqualification. — No person whose 
licence has  been endorsed under section 16 or who has been disqualified from 
holding a licence  shall apply for, or be eligible to hold a licence, without giving 
particulars of such endorsement or disqualification. 
20. Duty of money-lender to keep accounts and furnish copies.— (1) Every 
money-lender shall keep and maintain a cash book and a ledger 1[in Kannada or in  
English]1 in such form and in such manner as may be prescribed. 
1. Inserted by Act 2 of 1987 w.e.f. 16.10.1986. 
(2) Every money-lender shall,- 
(a) deliver or cause to be delivered,- 
(i) to the debtor within thirty days from the date on which a loan is made, a 
statement 1[either in Kannada or in English] 1 showing in clear and distinct terms the  
amount and date of the loan and of its maturity, the nature of the security, if any, for 
the loan, the name and address of the debtor and of the money -lender and the rate of 
interest charged: 
1. Substittued by Act 2 of 1987 w.e.f. 16.10.1986. 
Provided that no such statement shall be required to be delivered to a debtor if he 
is supplied by the money-lender with a pass book which shall be in the prescribed 
form and shall contain an up-to-date account of the transactions with the debtor; 
(ii) to the Assistant Registrar, within the said period, a statement containing the  
particulars referred to in sub-clause (i); 
(b) upon repayment of a loan in full, mark indelibly every paper signed by the  
 
debtor with words indicating payment or cancellation, and discharge every mortgage, 
restore every pledge, return every note and cancel or reassign every assignment 
given by the debtor as security for the loan. 
(3) No money-lender shall receive any payment from a debtor on account of any 
loan without giving him a duly signed receipt for the payment. 
(4) No money-lender shall accept from a debtor any article as a pawn, pledge or  
security for a loan without giving him a signed receipt for the same with its description, 
estimated value, the amount of loan advanced against it and such other particulars as  
may be prescribed. 
21. Delivery of statement of accounts and copies thereof by money -lender.—
(1) Every money-lender shall deliver or cause to be delivered every year to each of his 
debtors a legible statement of such debtor‟s accounts signed by the money -lender or 
his agent of any amount that may be outstanding against such debtor. The statement 
shall show,- 
(i) the amount of principal and the amount of interest, separately, due to 
the money-lender; 
(ii) the amount of every payment already received by the money-lender in 
respect of the loan during the year together with the date on which each payment was 
made; 
(iii) all payments credited first in the account of interest and the residue, if any, 
of any payment more than sufficient to discharge the balance of interest due at the 
time it is made, credited to the debtor in the account of principal, in the alternative such 
of the  payments credited first in the account of principal as the money -lender may 
determine and the remaining payments credited in the account of interest calculated 
on the basis of  the decreased balance of principal and when the balance of interest is 
fully discharged the residue of the payments, if any, further credited in the account of 
principal; 
(iv) the amount of principal and interest remaining unpaid. 
The statement shall be signed by the money -lender, or his agent, and shall be 
1[either in Kannada or in English]1. It shall be in such form and shall be supplied to the 
debtor on or before such date as may be prescribed: 
1. Substituted by Act 2 of 1987 w.e.f. 16.10.1986. 
Provided that no such statement shall be required to be delivered to a debtor if he 
is supplied by the money-lender with a pass book which shall be in the prescribed 
form and shall contain an up-to-date account of the transactions with the debtor. 
The money-lender shall on or before the aforesaid date deliver or cause to be 
delivered a statement containing the particulars specified in clauses (i) to (iv) to the  
Assistant Registrar. 
(2) In respect of any particular loan, whether advanced before or after the date on  
which this Act comes into force, the money -lender shall, on demand in writing being 
made by the debtor at any time during the period when the loan or any part thereof 
has not been repaid, and on payment of the prescribed fee supply to the debtor or if 
the debtor so requires, to any person specified in that behalf in the demand, a 
statement, 1[either in Kannada or in English] 1, signed by the money -lender or his agent, 
 
and containing the relevant particulars

Excerpt shown. Open the full act in Lexace.

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