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The case has revived a long-simmering debate, that is usury illegal in India, and if not, why does the law appear powerless in cases of extreme exploitation?
The interest, the family claimed, was fixed at Rs 10,000 per day. (Representational Image)
What often unfolds on the silver screen as exaggerated cruelty by moneylenders has played out with chilling reality in Maharashtra’s Chandrapur district, where a farmer’s desperation allegedly ended with the sale of his kidney to service a spiralling debt.
According to the account that has emerged, the farmer borrowed Rs 1 lakh from a local moneylender, only to see the amount surge into an unimaginable Rs 74 lakh under an exploitative interest regime. The interest, the family claimed, was fixed at Rs 10,000 per day.
As the debt mounted, the farmer reportedly sold two acres of agricultural land, his tractor and other belongings in a futile attempt to clear the dues. When these sacrifices failed to satisfy the lender, the farmer allegedly sold his kidney for Rs 8 lakh. Even that, the family said, did not bring relief from harassment.
The victim approached the police, but no immediate action followed, pushing the family to the brink. They then warned authorities that they will end their lives if justice was denied to them.
The case has revived a long-simmering debate, that is usury illegal in India, and if not, why does the law appear powerless in cases of extreme exploitation?
Contrary to popular belief, lending money at interest is not prohibited under law. Instead, it is regulated through a patchwork of central and state legislations. At the national level, the century-old Usurious Loans Act, 1918, governs private moneylenders. The Act does not criminalise usury but empowers civil courts to intervene if interest rates are found to be excessive or transactions unfair.
Courts can reduce the interest, cancel excessive claims or order the refund of interest already recovered. However, the law offers only civil remedies; it does not prescribe criminal punishment for charging exorbitant interest.
Regulation largely rests with states, many of which have enacted Money Lenders Acts to control the business. States such as Maharashtra, Rajasthan, Telangana and Karnataka mandate that moneylenders obtain a licence to operate.
Lending without a licence can attract penalties ranging from fines to imprisonment between three months and three years, depending on the state law. Karnataka law, for instance, caps interest at 18% per annum, while Kerala provides for imprisonment of up to 3 years and a fine for violations.
Criminal liability arises not from usury itself, but from the methods used to recover loans. If a lender resorts to intimidation, threats or violence, provisions of the Bharatiya Nyaya Sanhita (previously, the Indian Penal Code) can be invoked. Sections dealing with extortion and criminal intimidation carry punishments that can extend from 7-10 years in jail. Legal experts point out that it is under these sections, rather than any specific anti-usury law, that cases like the Chandrapur incident are pursued.
Recognising the limitations of the existing framework, the Centre last December initiated steps to introduce a comprehensive law to curb predatory lending. A draft Bill titled the Banning of Unregulated Lending Activities (BULA) has been released for consultation. The proposed legislation seeks to criminalise unregulated lending, prescribing imprisonment ranging from 2-7 years and fines between Rs 2 lakh and Rs 1 crore. In cases involving illegal recovery practices or harassment, jail terms could extend from 3-10 years, with fines up to twice the loan amount.
The Bill, however, remains a proposal and has not yet been enacted. Until it becomes law, unregulated moneylending continues to operate in legal grey zones, with civil courts and state-level regulations offering limited deterrence.
Click here to add News18 as your preferred news source on Google. December 18, 2025, 20:30 IST
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