Money Lending License Application and Cost in India

By | January 24, 2024

Someone who lends small sums of money at a higher interest rate is called a moneylender. Because the money lender runs a bigger risk of default than typical banks due to a variety of factors, higher rates of interest are charged.

People who are in dire need of money but do not have a bank account, those who have a poor credit history, and those who are unable to borrow money from friends or family turn to money lenders for credit facilities.

In many states of India, the Money Lenders Act governs money lenders as the Act of 1957 gives the Tamil Nadu government jurisdiction over the money lending process.

Every money lender must be licensed in order to operate. In this post, we examine the application process and cost of money lending license for money lending business in India.

What Does Money Lending License in India Entail?

The Revenue Department in India typically issues a money lender license three to four months after the application is submitted. The application is valid for a year after it has been submitted.

However, when a license is issued, renewed, or endorsed, certain aspects must be taken into account.

Money lending license cost in India

According to Euromonitor International, India’s customer lending is now valued at roughly $2.4 Billion and is projected to treble by 2026.

India is undoubtedly a good location for business. Investors may encounter several regulations alongside other market entry difficulties when they venture into money lending business in India.

Below are some factors to put into consideration when looking to get a money lender license in India

  • Inexperience

If the business promoters do not have the necessary documents prepared, the main process of getting them may begin before the license application is submitted.

A bank account is a requirement for applying for a money lender license, so some commercial banks can decide not to open one for the company due to the fact that they mistakenly think the company is expected to present a business license before creating a bank account.

This puts inexperienced applicants in a catch-23 situation. Our experience indicates that it is preferable to create a finance account with a commercial bank whose legal division is well-versed in India’s licensing requirements for mainly money lenders.

  • Manual Method

It may come as a surprise to learn that the whole process of getting a local finance license in India is carried out manually given that the industry has developed into a more sophisticated and technologically enabled structure.

Additionally, all additional needs (such the required police report, the request for a reference letter, etc.) are handled manually.

  • Application query 

According to past experience, insufficient standards and poor documents are the main causes of delays in the license acceptance for money lenders.

The regulators carefully review each document after it is submitted with an application. The application may be questioned and held up until all necessary documents are provided to the regulator if any necessary document or information is discovered to be incomplete, missing, or out of order.

Occasionally, the issue could not be addressed right away until the license applicant takes initiative to follow up on the whole application.

  • Pre-Licensing Visit Delay 

For instance, Tamil Nadu has a very important requirement for inspection and visiting as part of the licensing process.

The Major inspection visit aids the regulator in deciding whether or not to give the license. The regulator’s staffing levels, the quantity of open applications that need to be addressed, and the readiness of the applicant’s office will all have an impact on when the inspection visit is scheduled.

There will inevitably be a delay in cases when the regulator is overburdened with pending petitions.

  • Bureaucracy

Some States have a comparatively more complicated and bureaucratic licensing process than the rest.

For instance, in Tamil Nadu, the applicant must process a court-issued money lender certification first before submitting an application for a money lender license to India’s Ministry of Home Affairs.

Therefore, another factor contributing to the extended timeframe for licensure is the extensive documentation and processes a candidate must adequately go through before being approved.

  • Unable to Convincingly Respond to Questions from Regulators 

Regulators have questions regarding the true purpose for starting a licensed money lending firm in India.

After receiving the certified money lending license, the licensees reportedly pursue other businesses besides money lending, according to the regulators.

Because of this, the regulators grill applicants in-depth questions to ascertain their primary motivations and level of commitment to starting a certified money lending firm.

These questions include ones about the source of the funding, the target market, the operational processes, and the expansion strategy, among others.

Lack of convincing responses to the regulator’s inquiries may cause further delays or outright rejection of the application for a money lending license.

  • Origin of Funds 

Regulators may inquire during the pre-license inspections, particularly in Tamil Nadu, in accordance with the Anti-Money Laundering Act.

The likelihood of receiving a license may be impacted, and the Indian Legislative may delay approval until the license applicant provides convincing evidence that the main funds for the lending business were not obtained through any illegal means,

if there is any suspicion that the funds for the money lending business may have been the proceeds of crime.

  • Who are the owners of the money lending company? 

Although a corporate or individual stockholder can establish a corporation in India.

However, based on our main experience, it is preferable for a corporation applying for a certified money lender license to have verified individual shareholders rather than corporate stockholders (s).

The addresses and names of the Ultimate Beneficial Owners (UBO), if the applicant company is held by corporate shareholders, must be quickly disclosed to the policy regulators to avoid delays or refusal to obtain a license for money lending business in India.

  • Operative Language 

The Federal Competition Consumer Protection Board’s efforts to bring reason to the practices of certified money lenders in relation to material debt collection and disclosure were made evident in our update on fintech lending.

Money lenders’ use of savage and brutal tactics to collect debt from debtors has grown to be a source of concern over time, especially for law enforcement officials and regulators.

Due to this fact, the regulator makes sure that a Licence applicant has an operational strategy that is well stated and complies with regulations and industry standards.

Without the aforementioned, there may be further delays with the license application for certified money lenders.

  • Other Regulators’ Schedules 

In India, the authorities handling the issuing of licenses for money lenders are also charged with other duties.

For instance, in Tamil Nadu, the department of home affairs is in charge of overseeing the Welfare Board, religious groups, and state holidays, among other things.

These duties occasionally conflict with its extra duty as a licensed money lender.

Naturally, during the month of Ramadan, the Ministry of Home Affairs may not be as prompt in fulfilling its licensing obligations as it could be during other times of the month of year.

What Documents Are Required for this Licensing?

Anyone who wishes to start a money lending business in India should be required to simply apply for a local finance license in order to do so.

  • In-Person Submission 

The qualifying applicant must submit an application together with the necessary paperwork to the Thasildhar, district administration, concerned village Panchayat, Block Panchayat, or municipal entity assigned to handle the request.

Money lending license cost in India

Please visit the right office. To obtain the license, speak with the relevant authority about the most recent information.

Get the application for this license, or write as directed on plain paper.

Send the receiving authority your completed application and any necessary supporting documentation.

After reviewing the application and supporting documentation, authorities will make entries in the appropriate register and provide the applicant a record number for future reference.

  • Store it safely for future use

If the applicant’s information complies with requirements and the location for which the license is sought is authorized, the applicant will be notified of the next steps in the process.

Please adhere to the department’s regulations to receive the sanction and license.

Note: All applicants must adhere to the norms and regulations of the applicable state money lender act.

The loan’s interest rate and term should be set in accordance with state government regulations. In some regions, the applicants must go to in-person applications sites like e-seva or CSC centers.

In some states, applicants must submit their applications using the online state government site.

The following states are included in this list: Nicobar and Andaman, Assam, Bihar, Andhra Pradesh, Chhattisgarh, Chandigarh, Gujarat, Daman and Diu, Himachal Pradesh, Karnataka, Haryana, Kerala, and a few others.

Each state has some modifications in their application procedure. Pick the state you’re in and make sure you follow their procedure tentatively.

The essential documents include:

  • A request form
  • proof of identity
  • Snack Card
  • Account information
  • Address of the store or company (proof of address)
  • Fees paid information (Challan and details)
  • Education information
  • Residential Proof: A local government-issued certificate
  • Aadhaar card, administration office, passport, driver’s license
  • Ration Card, Government ID, Defense ID, or PAN Card.
  • Age verification (birth certificate or diploma)
  • Passport-sized photo of the applicant.
  • ID card, Aadhaar

If necessary, apply a stamp as instructed by the authorities.

Note: As instructed by the relevant authorities, all originals and copies of originals with self-attestation must be supplied.

Money lending license cost in India

Authorities may request additional information or documents in addition to those mentioned above. Please give them so we can process them.

How About Eligibility?

Age: at least 18 years old (If a minor is applying, have a guardian do so.).

The applicant must not have intentionally engaged in any fraud or deceit in the course of conducting or in connection with the business of money lending.

The applicant’s license shall not have been revoked within the previous six months or within the required time frame prior to the date of the present application.


  • Valid for five years or for the time period specified
  • The license must typically be renewed every year.

Basically, the following papers must be submitted in order to get a money lending license.

  • Form a form of application.
  • Passport-size images.
  • Three sample signatures mentioning the name of the lender or his representative.

How Much Does Money Lending License Cost in India?

To obtain the application form from the Tahasildar, the applicant must pay a cost of Rs. 100. The applicant must fill out the application form with all necessary information.

Frequently Asked Questions – FAQ

  • A money lending license is required for who?

A person who operates a money lending business or who represents themselves in any way as doing so through advertising, public announcements, or other means.

  • In India, how do I begin a private lending company?

In India, a finance company must have a minimum of two directors in order to be incorporated as a section 8 company.

  • Get their DIN and DSC.
  • Select a name and obtain ROC approval for it.
  • Request a license from the Central Government of India to engage in social work.
  • Apply for incorporation after receiving license approval.


  • What is the penalty for lending money illegally in India? 

The Act stipulates a three-year prison sentence and a Rs. 5,000 fine for charging excessive interest.

Aside from that, it also states that a borrower will face a five-year prison sentence and a fine of Rs. 50,000 if they commit suicide as a result of harassment by moneylenders.

  • How can I lend money in India legally?

The Central Bank of Ireland must receive the completed application for money lending (new or renewal) along with the necessary materials. See the Moneylender Authorization Process.

  • How much interest is permitted by law in India? 

The Money Lending Act prohibits charging excessive interest on loans. The standard interest rate that may be imposed shall not exceed 24 percent per annum.

  • Can I make loans without having a license? 

Lenders are not permitted to provide loans if they lack a consumer credit license. However, borrowing the money is permissible.

Loan sharks are unauthorized lenders. You are not required to repay the money you borrowed from loan sharks because they have no legal power to pursue it.

Leave a Reply

Your email address will not be published. Required fields are marked *