Chapter II REGISTRATION AND REGULATORY COMPLIANCE FOR LENDERS

Registration Requirement.—

1. (1) The Government may, by notification, appoint such number of officers to be the Registering Authority of money lending entities and define the areas of jurisdiction of such authority.
2. (2) The Registering Authority shall exercise such powers and perform such duties as may be prescribed.
3. (3) No money lending entity functioning in the State on the date of commencement of this Act or intending to start the business of money lending after the commencement of this Act, shall grant any loan or recover any loan without obtaining a Certificate of Registration under this Act: Provided that, every money lending entity functioning in the State as on the date of the commencement of this Act, shall, within ninety days from the date of commencement of this Act, obtain a Certificate of Registration from the Registering Authority under this Act.
4. (4) Every application for registration of money lending entity shall be submitted through the online portal as may be notified by the Government, in such electronic form, along with such documents and fees as may be prescribed.
5. (5) On receipt of such application, the Registering Authority shall verify the details furnished by the money lending entity and grant or refuse to grant a Certificate of Registration through online portal referred to in sub-section
6. (2) in such electronic form and within such time as may be prescribed: Provided that no such application shall be rejected without giving opportunity of being heard to the applicant and for reasons to be recorded.
7. (6) If no decision is made on the application for registration prescribed under sub-section
8. (3) by the Registering Authority concerned, within 90 days from the date of submission of applications, the Certificate of Registration shall be auto-generated and granted online in such form as may be prescribed.
9. (7) The certificate granted under sub-section
10. (3) or
11. (4) shall be valid for a period of three years from the date on which it is granted, subject to fulfillment of such terms and conditions specified therein: Provided that if any money lending entity intends to carry on its business in any other district or region other than the district or region where it has registered, it shall furnish the details of such registration in such electronic form as may be prescribed, to the Registering Authority of the district or region concerned where it intends to carry on its business.
12. (8) Every Certificate of Registration shall be renewed for a period of three years, in such manner and on payment of such fees and fulfillment of such conditions, as may be prescribed.
13. (9) Every application for renewal of the Certificate of Registration granted under this Act shall be made not less than sixty days before the date of expiry of the period of such certificate. Provided that the Registering Authority may entertain the application for renewal after the expiry of the prescribed aforesaid period but before the expiry of the period of the certificate, if it is satisfied that the applicant was prevented by sufficient cause from applying for renewal in time.
14. (10) On receipt of the application under sub-section (2), the Registering Authority shall verify the details furnished by the money lending entity and renew or refuse to renew the Certificate of Registration in such electronic form as may be prescribed, before the date of expiry of registration: Provided that no such application shall be rejected without giving opportunity of being heard to the application and for reasons to be recorded.
15. (11) If no decision is made on the application within the time limit prescribed under sub- section
16. (6) by the Registering Authority concerned, the renewal of Certificate of Registration shall be auto-generated and granted online in such form as may be prescribed.
17. (12) Provision for appeal.—Appeal against refusal to grant a certificate of Registration, Suspension or Revocation of certificate of registered by the registering authority, and appeal can be made before appellate authority within 60 days from the date of such refusal to grant certificate of Registration, Suspension or Revocation of certificate of registration. The appellate authority is expected to give its decision within 30 days of submission of such appeal.
18. (13) Register of MFIs. –
19. (1) Every registering authority shall maintain for the area under its jurisdiction registers of all MFIs having valid registration in such form as may be prescribed.
20. (2) The registers maintained under sub-section
21. (1) shall be published in such manner and at such intervals as may be prescribed.
22. (14) Digital lending platforms shall additionally comply with information technology security standards prescribed by the Central Government, data localization requirements as applicable, and customer protection guidelines as may be prescribed by the Government of Bihar in consultation with relevant central authorities.
23. (15) Any person or entity who advances loans without proper registration and certification shall be deemed to be carrying on illegal money lending business and shall be liable for penalties under this Act, provided that such person is given reasonable opportunity to regularize their operations within the prescribed time frame.

Transparency and disclosure obligations.—

1. (1) The effective rate of interest charged by the lenders shall be prominently displayed in all its offices, its website, and in the prospectus or brochure or advertisement notices, as the case may be.
2. (2) No Micro Finance Institution
   • (MFI) or Money Lending Agency or Organization shall recover from the borrower towards interest in respect of any loans advanced by it, whether before or after commencement of this Act, an amount in excess of the principal amount.
3. (3) Every Micro Finance Institution
   • (MFI) or Money Lending Agency or Organization shall keep and maintain a cashbook, a ledger and such other books of account in such form and in such manner as may be prescribed.
4. (4) Every loan application form shall include necessary information which may affect the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other money lending entities can be made and a proper decision can be taken by the borrower. Such application form shall indicate the documents required to be submitted with the application form.
5. (5) Every registered lender shall mandatorily comply with the following disclosure and transparency requirements before disbursing any loan:
   • (a) provide a written loan agreement in Hindi language clearly stating the principal loan amount, annual percentage rate of interest calculated on reducing balance method, processing charges, insurance premium if any, penal charges for delayed payment, total cost of credit, monthly installment amount, and complete repayment schedule with due dates;
   • (b) deliver a comprehensive pre-loan disclosure statement to the borrower at least seventy-two hours before loan disbursement, explaining all terms and conditions, borrower’s rights and obligations under this Act, consequences of default, available grievance redressal mechanisms, and contact details of regulatory authorities;
   • (c) establish and maintain an office within the State of Bihar with adequate infrastructure for borrower services, complaint resolution, and document storage, which shall remain accessible to borrowers during prescribed business hours;
   • (d) ensure that all communications, documents, notices, and correspondence with borrowers are provided in Hindi or the local language understood by the borrower, and no borrower shall be compelled to understand or sign documents in any language other than Hindi or the local language;
   • (e) issue computer-generated or properly signed receipts bearing the name, address, and registration number of the lender for every repayment received from the borrower, whether in cash, cheque, or through digital payment modes, and such receipts shall clearly show the amount received, date of payment, and outstanding balance;
   • (f) supply photocopies of all loan-related documents including the loan agreement, repayment schedule, and transaction history to the borrower free of cost within seven working days of written request;
   • (g) display prominently at all branch offices, on websites, and in all advertisements the maximum interest rates charged, processing fees, penal charges, standard terms and conditions of loans, and grievance redressal contact information.
6. (6) Every lender shall provide the borrower a loan passbook or digital loan statement containing the following mandatory information:
   • (a) name, address, and registration details of the lender and complete details of the borrower;
   • (b) principal amount sanctioned and actually disbursed with dates;
   • (c) effective annual percentage rate of interest and method of calculation;
   • (d) detailed breakdown of all charges, fees, insurance costs, and additional expenses;
   • (e) complete repayment schedule showing installment amounts and due dates;
   • (f) acknowledgment and date of all repayments received with running balance;
   • (g) current outstanding principal and interest amounts after each payment;
   • (h) final discharge certificate upon complete repayment of the loan.
7. (7) No lender shall charge any amount, fee, or penalty that is not explicitly disclosed in the loan agreement and pre-loan disclosure statement signed by the borrower.
8. (8) Every lender shall establish a toll-free helpline number staffed by trained personnel for borrower queries, complaints, and assistance, and such helpline shall be operational during business hours on all working days.
9. (9) Submissions of monthly statement by MFIs – Every MFI shall submit a Monthly Statement to the Registering Authority before 10th day of every month giving therein the list of borrowers, the loan given to each and the interest rate charged on the repayment made.
10. (10) Provision of submissions of annual returns – Every MFI shall submit annual returns for the financial year ending 31st March every year before to the Registering Authority latest by the end of month “May” of next financial year.
11. (11) Multiple-lending Over-borrowing.— 1) Non-Banking Financial Company
    • (NBFC) – Micro Finance Institutions
    • (MFIs) can lend to individual borrowers who are not member of Joint Liability Group
    • (JLG) or Self Help Group
    • (SHG) or to borrowers that are members of Joint Liability Group
    • (JLG) or Self Help Group (SHG). 2) A borrower cannot be a member of more than one Self Help Group
    • (SHG) or Joint Liability Group (JLG). 3) Not more than two
12. (02) Micro Finance Institutions
    • (MFI) or Money Lending Agency or Organization shall lend to the same borrower. 4) There shall be a minimum period of moratorium between the grant of the loan and the due date of the repayment of the first installment. The moratorium shall not be less than the frequency of repayment. For Example: In the case of weekly repayment, the moratorium shall not be less than one week. 5) Recovery of loan made in violation of the recovery norms shall be deferred till all prior existing loans are fully repaid. 6) All sanctioning and disbursement of loans shall be done only at a central location and more than one individual shall be involved in this function.

Prohibition of security requirements for Micro loans Prohibition of security requirements for Micro loans.—

1. (1) No lender shall demand, obtain, or retain any form of security, collateral, guarantee, or third-party assurance for loans not exceeding such amount as may be prescribed by the State Government under this Act, and such loans shall be advanced solely on the basis of borrower's creditworthiness, repayment capacity, income assessment, and such other criteria as may be prescribed.
2. (2) The Government of Bihar shall within 90 days of the commencement of this Act, prescribe by rules, the threshold amounts up to which no security or collateral may be required, taking into consideration the economic conditions of borrowers, regional variations in income levels, inflation rates, and the need to promote financial inclusion while ensuring reasonable protection to lenders.
3. (3) Any security, collateral, or guarantee obtained by any lender for loans covered under sub-section
4. (1) prior to the commencement of this Act shall be deemed void and unenforceable, and shall be returned to the borrower or guarantor within thirty days of such commencement without any cost or condition.
5. (4) For loans exceeding the prescribed threshold amounts but remaining within the overall loan limits specified in this Act, lenders may obtain security only in the following permissible forms:
   • (a) pledge of gold ornaments with proper valuation and storage safeguards;
   • (b) lien on bank deposits or government securities;
   • (c) mortgage of immovable property other than the borrower's primary residence or agricultural land being personally cultivated;
   • (d) guarantee from financially sound third parties with their explicit written consent and full disclosure of liability; provided that the value of such security does not exceed the loan amount by more than twenty-five percent and the security arrangement does not impose undue hardship on the borrower or guarantor.
6. (5) No lender shall retain, confiscate, or demand as security any document that is essential for the borrower’s daily life or livelihood, including original documents of residential property used for actual residence, agricultural land being personally cultivated, ration cards, Aadhaar cards, voter identity cards, driving licenses, educational certificates, caste certificates, income certificates, pension documents, or any other government-issued entitlement documents.
7. (6) Where permissible security is taken, the lender shall execute a proper security agreement clearly specifying the security provided, conditions for release, and borrower’s rights, and shall return such security immediately upon full repayment of the loan.
8. (7) The Government of Bihar may, from time to time, review and revise the prescribed threshold amounts under sub-section
9. (2) based on economic conditions, borrower feedback, and the functioning of the microfinance sector, provided that any revision reducing the threshold limits shall not apply to existing borrowers and loans sanctioned before such revision.