The law stipulates imprisonment and sanctions depending on the breach of the coercive clause. | Photo Credit: Getty Images/Istockphoto
The state government announced the Act on Loaning of Money Tamil Nadu (prevention of coercive events), 2025, which is intended to prevent a coercive recovery of micro-lyans from money borrowing entities. The Assembly approved the legislation in April and received the government’s approval on June 9.
The aim of the law is to protect weaker and vulnerable groups and individuals-especially farmers, women, and self-help groups-a coercive recovery of loans by lending entities such as microfinance institutions and agencies for lending money operating in Tamil Nadu. It is paid to all entities lending money, including digital loans platforms, but not banks, non -banking financial companies registered with the Indian reserve bank and cooperative bank and companies.
However, the provisions of the law concerning the coercive proceedings against the debtor applies to non -banking financial companies registered with RBI and cooperative banks and companies.
Micro-Loan means a loan provided by households with an annual home intake of up to 3 lakh. The household means an individual family unit: husband, wife and their unmarried son and daughter. The debtor means an individual or group of individuals or self -help groups or groups of common liability, according to the law.
Section 20 of the Act also states what the coercive negotiations represent. This involves the defending or use of violence against or offensive or intimidation of the debtor or one of its family members. The use of private or external or external agencies to negotiate or urgent the debtor to make a payment by means of coercive and undue influence or to force any debtor’s document that entitles him to the benefits of government programs that any other vital documents, articles or household goods will also be accidentally proceeded.
The law stipulates imprisonment and sanctions depending on the breach of the coercive clause.
The government shall appoint a registration body. The Act states that the registration body can accept complaints of Suo Motu or accept and pass them on to the jurisdiction police. The rules launch the procedure for registering complaints that are still notified, says the lawyer R. Thiroorty. The law orders the police not to refuse complaints, he adds.
“Act Has Exempped the Regulated Entities from Its Purview. However, The Clause On Penalty for Coercive Practice is Made Applicable to All, Exception Banks Against Any Coercive Practices in Recovery and We Have Given Adequate Instructions to That Effect, ”Says Jiji Mammen, Executive Director and CEO of Sa-Dhan, and self-regulation organizations for the microfinance industry.
Published – June 15 2025 20:44
