RMA warns that money lenders not following rules will lose their money
Bhutan has only one authorized money lender as per the records of the Royal Monetary Authority (RMA).
The person in question is a Tshering Penjor from Paro who registered with the RMA in March 2018 after fulfilling all the necessary legal obligations.
RMA’s Chief General Counsel Damcho Tenzin said that he has heard that there are more people who have applied with the courts and especially so in Thimphu to get the compulsory legal affidavit.
The court as part of giving the affidavit will enquire with all the courts in the 20 Dzongkhags and also all Dungkhags to see if there is any ongoing financial case against the money lender.
Damcho said that this is important to ensure the solvency and reliability of the money lender. If there is a case of unpaid loans by the money lender, then the RMA would not register the money lender.
This apparent lack of enthusiasm to register with RMA may have to do with the fact that the Private Money Lending Rules and Regulations, 2016 restricts the maximum amount to Nu 500,000 and does not allow an interest rate higher then 15 percent per annum. Private money lenders charge much higher interest rates and lend far bigger amounts.
After 1st April 2016, if the amount lent out by a moneylender exceeds Nu 500,000 then no court would accept the case and it would be the loss of the moneylender.
An amount up to Nu 90,000 can be leant among family members and friends without having to register as a money lender.
Damcho Tenzin said that so far the RMA is officially aware of a case in the Wangdi court where a borrower had lent out more than Nu 500,000 after the rules came into force and the court had thrown out the case.
He said that the excuse given by the unauthorized money lender that he did not know the rule is not acceptable to any court as ignorance of the law cannot be a defense.
Damcho Tenzin said that if other money lenders also do not register and do not follow the private money lending rules then they stand to lose all their borrowed amounts.
At the moment the courts are only honoring those money lending agreements exceeding Nu 500,000 which were signed before 1st April 2016 as a law cannot be applied retroactively.
However, some money lenders are now resorting to lending large sums of money even after the rules have come into force by backdating the legal agreements.
Here Damcho Tenzin said that it is not only illegal to do so, but that the money lender is carrying a huge risk.
He said that if the case goes to court then the court will do its own detailed study and get to the bottom of the matter. Damcho said that if its is found that the agreement is backdated then the court will throw out the case and the money lender will not get back his or her money.
The RMA the Supreme Court had worked together to come up with the rules.
Damcho said that extensive sensitization had been carried out on the rules at various levels including the local government and copies had been sent to all Dzongkhags and Gups too.