High interest on gold loans: Co-op dept files plaint against 2 firms

Rate ceiling under the Act not applicable: Companies

The Co-operation Department has filed complaints with the police against non-banking financial companies (NBFCs) that charge exorbitant interest rates for gold loans, exceeding the limit fixed by the Government.

K S Naveen, the joint registrar of the legal cell of the department, told Deccan Herald that the High Court of Karnataka, in its interim order on a public interest litigation, had sought information from the government over the action taken against NBFCs which charge exorbitant interest rates.

Naveen said that information had been sought from the district sub-registrars of the department in this regard, to be submitted to the court.

The Co-operation Department has issued a circular to the district sub-registrars to take action against pawn brokers and NBFCs charging exorbitant rates of interest on gold loan.

Veeranna B Yalalli, the Dharwad district sub-registrar, said that two Kerala-based companies - Muthoot Finance and Manappuram Gold Loan and Finance - which have 18 branches in Hubli-Dharwad - had through an undertaking agreed that they were charging interest rates between 12 and 29 per cent. However, the Karnataka Moneylenders Act, 1961, stipulates the maximum annual interest rate ceiling at 14 per cent for secured loans and 16 per cent for un-secured loans.

He said these companies were transacting business without obtaining licence as per the Karnataka Moneylenders Act, 1961, even though they are registered with the Reserve Bank of India (RBI).

Yalalli said complaints against such companies had been sent to the police stations, under which these 18 branches fall, through registered post as they refused to register FIRs. Yalalli said they had also brought the matter to the notice of the Hubli-Dharwad police commissioner.

Dr K Ramachandra Rao, the Hubli-Dharwad police commissioner, said that a complaint had been registered against the branch of Manappuram Gold Loan and Finance in the Old Hubli police station limits.

The branch manager was summoned to the police station and he had told the police that they were registered with the RBI and that they had been given exemption by the governor with regard to following interest rates fixed by the government. Rao said the matter would be investigated.

Shashidhar Patil, zonal manager of Manappuram Gold Loan and Finance, said that they had replied to the notice from the Co-operation Department.

The company’s board of directors had powers to fix interest rates based on risk factors and market value, he said.

Chandrashekhar, zonal manager of Muthoot Finance, said the company did not come under the jurisdiction of the Co-operation Department and that the said Act did not apply to them.