India likely to bring law to ban unorganised lending activities – CNBC TV18

The government is likely to introduce a new law aimed at providing relief to Non-Banking Financial Companies (NBFCs) and microfinance institutions, according to CNBC Awaz report.

This move follows a proposal to ban unorganised lending activities, which have long been a concern for the financial sector.

The Reserve Bank of India (RBI) has shared a draft of the bill with the Finance Ministry, the report said.

The proposed law will target unrecognised and unregulated lending, especially in the growing digital space.

Under the new rules, unregulated digital lending activities will be banned, as well as any funding or advertising related to these operations.

A key part of the proposal includes establishing an authority tasked with creating a comprehensive database of legitimate lenders.

This will ensure better tracking of lending operations and protect borrowers from exploitation by unauthorised lenders.

The government’s proposal is expected to bring transparency and regulation to the lending ecosystem.

In addition to this regulatory move, recent findings from Paisabazaar, a marketplace for consumer credit, reveal that over 70% of Micro, Small, and Medium Enterprises (MSMEs) are seeking loans to meet immediate financial needs, such as working capital expenses, purchasing raw materials, and consolidating debts.

This highlights the ongoing liquidity crunch faced by small businesses.

The report further states that fewer than 30% of businesses are seeking credit for growth initiatives like marketing, upgrading machinery, or expanding office space.