Maximum rate of interest for peer to peer lending
I have taken a loan from my friend in India for Rs. 3 lacs at an interest rate of 24% p.a
I wanted to know whether there is any cap on the maximum interest that can be charged for peer to peer lending as per any Indian law.
If there is any cap, can I challenge it in the court of law if my friend is charging me more than that.
Asked 2 years ago in Civil Law from Hyderabad, Telangana
Terms of contract are sacrosanct
2) if you have agreed to pay interest at 24 per cent your friend can recover said amount from you if he is not a money lender
3) . No person can carry on a business of moneylending except in accordance with the licence issued to him under the Money Lenders Act of yiur state .Under the same Act, the government is empowered to fix the maximum rate of interest for secured and unsecured loans. For instance Under the Karnataka Prohibition of Charging Exorbitant Interest Act 2004, no person can charge an interest of more than 18 per cent per annum. Any person who charges interest above this rate is liable for imprisonment for a term that may extend to three years and also a fine that may extend to Rs 30,000.
There is no cap if the aprties mutually agree on rate of interest. However the financial institutions certainly can not charge that much of rate and certainly in that sector there is upper cap which is absent in private arrangements like yours.
This is money lending which is illegal in India, if your friend has license for lending the money on interest then only he is right otherwise not.
Advocate, New Delhi
There is no such cap. Once you execute an agreement or promissory note wherein you agree to repay the loan at a particular rate of interest you are bound by it.
As per money lending act, interest on loans cannot be charged exorbitantly.
The normal interest that shall be chargeable shall restrict to 24% pa.