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This is with reference to "Why financial system must legitimise moneylenders" (Business Line, October 19): According to the Tamil Nadu Money Lenders Act, 1957, the moneylender is required to obtain a licence to carry on his business. He is allowed to charge interest only at certain notified rates not exceeding what is prescribed. He can charge borrowers for keeping their accounts. There is no specific provision that allows the moneylender to recover his debts expeditiously. He is required to maintain proper records and give receipts.

The "licensed money lending business" seems to have been a non-starter. For small moneylenders to become viable in the villages there must not only be a culture change but also easy methods of recovery built into the system.

Micro-lending has become fashionable and acceptable now; there is a need for resurrecting the system of "licensed moneylenders."

S. Ramasubramaniam

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