Maximum interest a private lender can charge in India, state by state

Is there one legal interest rate in India?

No. Under the Constitution, money-lending is a state subject (State List, entry 30). State money-lending Acts set maximum rates, or let the state government set them by notification, usually one for secured loans (backed by a pledge or mortgage) and one for unsecured loans. Most bind money-lenders; a few states go further, as the table shows.

The Acts we read leave banks out (those of Tamil Nadu, Rajasthan, West Bengal and Maharashtra, for example), and some also leave out RBI-registered NBFCs: Maharashtra’s Act does not count banks, co-operative banks or non-banking financial companies as money-lenders.

Legal interest rate limits, state by state

Each rate is % a year, with the same rate in rupaye sekda (₹ per ₹100 a month, which is the yearly rate ÷ 12). We list only states where we read the law or the government notification ourselves.

Not yet verified: Maharashtra, Gujarat, Odisha, Madhya Pradesh, Telangana, Andhra Pradesh, Punjab, Haryana and the other states. Maharashtra and Gujarat do have the power to fix rates (Maharashtra Act s.31, Gujarat Act s.33), but we have not yet read the notifications that set them. If your state is not in the table, ask its registrar of money-lenders or a lawyer.

Is 24% interest (₹2 sekda) legal?

₹2 sekda is 24% a year. That is above every limit in the table; the highest, West Bengal’s 20% on unsecured loans for business, is ₹1.67 sekda. ₹3 sekda is 36% a year, far above. Whether this makes your own loan unlawful turns on two questions:

• Does the limit bind you? In most states it binds money-lenders in business. In Karnataka, Tamil Nadu and Kerala, charging above it is "exorbitant interest" for any person; in West Bengal the limits protect every borrower; in Gujarat the bar covers "a person advancing a loan".
• What follows if it is broken? See what happens if a lender charges more below.

What does "exorbitant interest" mean?

Where the law uses the word, it is defined precisely: any rate above the one the state fixes, however the interest is collected.

• Karnataka (2004 Act, s.2): interest charged "on hourly basis, daily basis, installment basis, monthly basis or in any other form" that works out above the rate fixed under the Money-Lenders Act.
• Tamil Nadu (2003 Act, s.2): daily vatti, hourly vatti, kandhu vatti, meter vatti and thandal, each defined as interest that works out above the state’s rate.
• Kerala (2012 Act, s.2): any rate above the Money-Lenders Act rate, including daily, hourly, kandu and meter vatti and thandal.

Daily collection hides the real rate. ₹10 a day on ₹10,000 is ₹300 over a 30-day month, that is ₹3 sekda or 36% a year.

What happens if a lender charges more than the limit?

• The higher rate can’t be enforced. An agreement above the limit is not valid, and the court won’t award more (Karnataka s.28(2), Maharashtra s.31(4), Rajasthan s.29(3), Gujarat s.33(2)).
• It can be an offence. Up to 10 years in jail and a fine up to ₹5 lakh in Karnataka, and up to 3 years in Tamil Nadu and Kerala, under the exorbitant-interest Acts. In Maharashtra, a fine up to ₹25,000, or ₹50,000 for a repeat offence (s.44).
• In Gujarat the loan can be wiped out. If interest above the limit was collected, the loan stands discharged and the excess must be refunded (s.33(4)).
• The borrower can go to court. In Karnataka, Tamil Nadu and Kerala the borrower can deposit the dues with interest at the state’s rate in court, and ask for interest already paid above that rate to be set against the loan (s.5 and s.8 of each state’s Act).

More on licences, cash loans and lawful recovery: is lending money on interest legal?

Courts can cut interest, and some states cap the total

Even without a state ceiling, the Usurious Loans Act, 1918 (s.3) lets a court reopen a loan where the interest is excessive and the deal was substantially unfair, and relieve the borrower of the excess. "Excessive" means more than the court thinks reasonable for the risk the lender faced when the loan was made; the court weighs any security, the borrower’s finances, other charges and how often interest was compounded.

Some states also cap the total interest, a rule like damdupat:

• Maharashtra (s.31(3)): a money-lender can’t charge or recover interest greater than the principal.
• Karnataka (s.26) and Tamil Nadu (s.20-A): a court can’t decree interest greater than the principal due on the date of the decree.
• West Bengal (s.30): on loans other than for business, a borrower isn’t liable to pay more than twice the original principal in all, or unpaid interest above the unpaid principal.

Compound interest is restricted too: Maharashtra bars money-lenders from taking it (s.31(2)), and the Rajasthan, Kerala, Tamil Nadu and West Bengal limits are all for simple interest. See simple vs compound interest.

Delhi and Uttar Pradesh

Delhi: we found no notified ceiling. But Delhi’s Law Department lists the Punjab Relief of Indebtedness Act, 1934 among the Acts extended to Delhi, and that Act amended section 3 of the Usurious Loans Act. As the Supreme Court read it in Dayawati v. Inderjit (1966), a court must reopen the loan and treat interest as excessive above 7.5% a year simple (or 2% over the Bank Rate when the loan was taken, if that is higher) on secured loans, and above 12.5% (₹1.04 sekda) on unsecured loans.

Uttar Pradesh: the U.P. Repealing Act, 2022 repealed the Uttar Pradesh Regulation of Money Lending Act, 1976, so there is no state ceiling under that Act now. How the courts’ general powers apply to an Uttar Pradesh loan is a question for a lawyer.

How much is above the limit? A worked example

Take ₹1,00,000 lent for 12 months, 1 January 2026 to 1 January 2027, at simple interest:

At ₹3 sekda the lender would ask for ₹36,000 of interest. At Kerala’s 18% it would be ₹18,000, so ₹18,000 is above the state’s rate. If the borrower had paid that excess, it is what a Kerala court can set against the loan under the 2012 Act (s.8).

Sources

• Constitution of India, Seventh Schedule (Legislative Department): State List, entry 30.
• Tamil Nadu Money-lenders Act, 1957: ss.2, 7 and 20-A; G.O. Ms. No. 406, Co-operation, 5 July 1979, as printed with the Tamil Nadu Money-Lenders Rules.
• Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003: ss.2 to 8.
• Karnataka Money-Lenders Act, 1961: ss.26 and 28; Co-operation Department, Government of Karnataka: money-lenders page, citing the notification of 28-9-2003.
• Karnataka Prohibition of Charging Exorbitant Interest Act, 2004, with Amendment Act 17 of 2025: ss.2 to 8.
• Kerala Money-Lenders Act, 1958, section 7, as substituted by Kerala Act 5 of 2019; Kerala Prohibition of Charging Exorbitant Interest Act, 2012 (India Code): ss.2, 3, 5, 8 and 9.
• Rajasthan Money-Lenders Act, 1963, with notifications (Revenue Department): s.29 and the notification of 19 February 1975.
• Bihar Money-Lenders Act, 1974: ss.2 and 9.
• Bengal Money-lenders Act, 1940 (Kolkata Collectorate): ss.2, 30 and 30A; State Registrar of Money Lenders, letter of 2018 confirming the Act as modified up to 1981.
• Maharashtra Money-Lending (Regulation) Act, 2014: ss.2, 31 and 44.
• Gujarat Money-Lenders Act, 2011: s.33.
• Usurious Loans Act, 1918 (Tripura High Court copy): s.3; Dayawati v. Inderjit, Supreme Court, 1966; Acts extended to Delhi (Law Department, Delhi).
• Uttar Pradesh Repealing Act, 2022: Schedule.