Tuesday, December 5, 2023



Money lending is the process of giving a loan to a borrower at a specific rate of interest when he caters for financial needs. The process of money lending has existed since time immemorial. There are various institutions and people who provide credit to the borrower to fulfil their financial needs, like money lenders, banks, and other financial institutions. Money lenders provide short-term credit to the borrower, usually with a high rate of interest. The business of money lenders is quite famous and is running successfully in rural and backward areas. There is a difference between money lenders and professional money lenders. This article provides a general overview of why borrowers should opt to avail credit from process money lenders.

Definition of professional money lenders

Money lending is the process of providing a loan to the borrower, which means their main business is money lending to people. Professional money lenders are those people or groups of individuals who are engaged only in the business of money lending and are not engaged in any other kind of business except money lending and good at money lending in toa Payoh central, which implies that their primary business is money lending.

Money Lenders’ Rules and Guidelines

Moneylenders provide and establish a nexus between the formal lending sector (banks and financial institutions) and the informal sector of lending (money lenders), so there is an emergent need for a legal framework and to keep a check on the regulatory authorities of the country. So, the primary responsibility of making laws and rules regarding money lending is imposed on the state. The state has the authority to make laws and regulations regarding money lending, and it can be evidenced by the Seventh Schedule, state list (II), Entry 30. There are various states which have made laws regarding money lending, like Maharashtra. Apart from that, the Consumer Credit Act, 1995, states the rules and regulations for the business of money lending.To strengthen the functioning of money lending, the Reserve Bank of India grants a licence to a person who is engaged in money lending based on credit worthiness and interest rates charged on the credit.

Why choose professional money lenders

Professional money lenders are formally engaged in the business of money lending and have a licence to carry out the business of lending in a specific area. Except in that specified area, they cannot do the business of money lending. They provide the facility of loans in cash, unlike non-professional money lenders who sometimes provide loans in kind also. The benefit of availing credit from professional money lenders is that they are somehow regulated by the Central Bank and the law of the land.


Professional money lenders are those people whose primary concern is to offer the facility of a loan to the borrower. The money lending act specifies that granting frequent loans does not count as process money lending. It should be consecutive in nature. So, if a borrower takes a loan from a money lender, it would lead to abuse of power by money lenders because they would have coercive pressure on the borrowers in the village because they are unregulated by any body or authority.