Money lending licence in Uttar Pradesh: abolished — what applies now

What the old licence required

For context — and because many shops still hold the paper — the 1976 Act and Rules worked like this until 2022:

• A registration certificate from the Registrar of Money-Lenders, who was the Additional District Magistrate; sub-divisional officers and tahsildars were the deputies. It was a Revenue Department function, run from the collectorate.
• Application in Form 2, with a fee of ₹15; renewal ₹15, late fee ₹5. No security deposit.
• A certificate valid for three years (from the 2008 amendment), renewed a month before expiry.
• Interest capped by notification at 14% a year on secured loans and 17% on unsecured loans, simple interest, from 1976 and 1985.
• A cash book, ledger, receipt book and a separate pledge receipt book (Form 8) for gold and other movables; a yearly return within 60 days of 31 March; loans of ₹2,500 or more only by account-payee cheque.
• Lending without the certificate: up to three years’ imprisonment and a fine of at least ₹5,000, and no suit to recover the loan.

None of this applies since the repeal. Rights and liabilities that had already arisen were saved.

What governs a gold pledge in UP now

With the state Act gone, a loan against pledged ornaments is governed by the general law: sections 172 to 179 of the Indian Contract Act, 1872. The parts that matter at the counter:

• The pawnee may keep the goods until the loan, interest and necessary expenses are paid (section 173).
• If the pawnor defaults, the pawnee may sue, or sell the goods after giving the pawnor reasonable notice; any surplus goes to the pawnor, and any shortfall is still owed (section 176).
• The pawnor may redeem at any time before the actual sale, paying the expenses caused by the default (section 177).

There is no statutory interest ceiling in UP today: the 14% and 17% notifications died with the Act, and the Usurious Loans Act of 1918, which the 1976 Act had repealed for UP, was not revived. Courts have always been able to cut down interest under the Contract Act where a lender dominated a borrower, so a rate that would shock a judge is still a bad idea.

A word of caution

When the licences were cancelled, some district officials told the press that lending at interest was now “illegal” in UP. That is an official’s remark, not a statute — the repeal removed the licence, it did not enact a ban — but a shop that lends should take advice from a local lawyer before relying on either reading, and keep its paperwork as if the old Act still applied. The Karnataka and Maharashtra guides show what regulated states expect; the same records are your evidence in any UP court.

Registrations that still apply

• Shops and Establishments registration under the UP Dookan Aur Vanijya Adhishthan Adhiniyam, 1962, from the Labour Department — available on Nivesh Mitra.
• PAN for the firm and, for a proprietor, income tax on the interest earned; Udyam registration if you want MSME status.
• GST only if you also sell jewellery or other goods above the threshold — interest on a loan is exempt from GST.
• BIS hallmarking rules apply to gold you sell, not to ornaments you hold in pledge.

What may change: the central Bill

In December 2024 the Union finance ministry published a draft Banning of Unregulated Lending Activities Bill, which would make lending by anyone not authorised by a regulator an offence with up to ten years’ imprisonment. Its introduction had not been confirmed by September 2026. If it passes, private lending in UP would need a regulator’s authorisation, not a state licence. Separately, the RBI’s 2025 directions on gold loans — the 85% loan-to-value tiers — bind banks, co-operative banks and NBFCs, not private lenders.

What a UP shop should keep anyway

Without a Registrar to satisfy, your books are for the customer, the court and the tax officer. Keep the set the regulated states ask for:

• A pledge receipt for every loan: article, weight, purity, value, amount, rate, date, and the notice period before sale
• A loan ledger and a cash book, and a receipt for every payment
• A written, dated notice before selling any unredeemed pledge, and a record of the sale and the surplus paid
• Customer identity and address proof, and a photograph of the ornaments at pledge and at release

How software fits in

GoldKhata keeps exactly that set as you work: a printed pledge bill with the article, weight and terms, the loan ledger and cash book, WhatsApp receipts for every payment, dated notices before an auction, and photos at pledge and release. Interest is counted your way — simple or compound, your first-month rule — at whatever rate you set.

Sources

• Uttar Pradesh Repealing Act, 2022 (Gazette, 13 December 2022) — Schedule item 14
• Uttar Pradesh Regulation of Money-Lending Act, 1976 — text with the 1976 and 1985 interest notifications
• Nivesh Mitra — list of approvals (no lending licence)
• Indian Contract Act, 1872 — sections 172–179 on pledge
• RBI — Lending Against Gold and Silver Collateral Directions, 2025

Frequently asked questions