Tamil Nadu Money Lending Act 2025: what it bans and how to complain

The Tamil Nadu Money Lending Act 2025, in full the Tamil Nadu Money Lending Entities (Prevention of Coercive Actions) Act, 2025, came into force on 19 November 2025. It bans coercive loan recovery by microfinance institutions, money-lending agencies, private lenders and digital lending platforms in the state, and its coercive-action rules also apply to RBI-registered NBFCs. Threats, insults, following you, or grabbing your documents can be punished with up to five years in jail. You can complain at your local police station or to the District Collector. This guide explains the Act for borrowers in Chennai and across Tamil Nadu.

What is the Tamil Nadu Money Lending Act 2025?

It is a state law, Tamil Nadu Act 40 of 2025, passed to protect borrowers, especially farmers, women and women's self-help groups, from coercive recovery. It does three things. It makes money lenders in the state register with the government. It sets transparency rules for how they lend. And it makes coercive recovery a crime, with jail terms, fines and a special rule on suicide.

The Act received the Governor's assent on 9 June 2025, and that is the date some news reports give. It did not take effect then. The Home Department fixed 19 November 2025 as the start date, in a notification published in the Tamil Nadu Government Gazette that day, and the Rules under the Act were notified on the same day.

Who does the Act cover?

The Act uses the term 'money lending entity'. It includes any microfinance institution, money-lending agency or organisation, partnership firm, individual, group of persons or digital lending platform whose main or side business is lending money and recovering it, whatever it calls itself. So it reaches the local financier in your area as well as a loan app operating in Tamil Nadu.

Self-help groups and their federations are not treated as money lenders under the Act. If you are not sure which kind of lender you owe, check the RBI's list of registered NBFCs, and the public list of registered money lending entities on the state portal, tnmoneylending.tn.gov.in.

What coercive actions does the Act ban?

Section 20 says no borrower or family member may be subjected to coercive action by a lender or its agents while recovering a loan. For this part of the Act, family means your parents, spouse and children. Any of these five things, if connected with recovery, may amount to coercive action.

• Obstructing, using violence against, insulting or intimidating you or your family.
• Persistently following you or your family from place to place, or interfering with property you own or use, or stopping you from using it.
• Hanging around your home, workplace, shop or wherever you happen to be, with the intention of coercing you.
• Using private, outsourced or outside agencies to pressure you into paying through coercion and undue influence.
• Trying to forcibly take documents that give you a government benefit, other vital documents, or household belongings.

In practice, this covers the recovery problems we hear about most: agents who shout at the door in front of neighbours, follow a borrower to work, sit outside a shop, take away a ration card, Aadhaar card or passbook, or pick up a television or a two-wheeler without any legal process.

Penalties under the Act

Under Section 24, all these offences except those in Sections 19 and 23 are cognizable and non-bailable. That means police can register a case and arrest without a court's warrant, and bail is a matter for the court. Where the lender is a company, the people in charge of its business can also be prosecuted. If a lender is convicted, the Registering Authority can suspend or cancel its registration.

Section 22 deals with the worst case. If a borrower or family member dies by suicide, and it is proved that they faced coercive action by the lender or its agents just before, the lender and agents are deemed to have abetted the suicide under Section 108 of the Bharatiya Nyaya Sanhita, 2023.

Some news reports from the time the Bill was tabled mentioned a 10-year jail term. That figure does not appear in the Act as published in the Gazette, which sets the terms above. Go by the Act.

How to complain in Chennai or anywhere in Tamil Nadu

Section 16 gives you two routes, and you can use either. You can complain to the jurisdictional police station, meaning the station for the area where the incident happened. Or you can complain to the Registering Authority, either the one where the lender is registered or the one where it operates. Since February 2026, the Registering Authority is the District Collector of each district. If the Collector's inquiry finds a prima facie criminal offence, the complaint is forwarded to the police.

1. 1Write down what happened: the date, time, place, the agent's name and phone number, and the lender's name.
2. 2Keep evidence: call recordings, WhatsApp messages, photos or video, and the names of anyone who saw it.
3. 3Go to the police station for the area, and give a written complaint that names the Tamil Nadu Money Lending Entities (Prevention of Coercive Actions) Act, 2025 and the conduct under Section 20. Ask for a receipt or a copy of the FIR.
4. 4If the lender is not a bank, you can also send a complaint to the District Collector as Registering Authority, and check the state portal for the lender's registration.
5. 5If the lender is an RBI-registered NBFC or a bank, also complain in writing to its grievance officer. If it does not resolve the complaint within 30 days, file on the RBI's Complaint Management System at cms.rbi.org.in.
6. 6For threats online, fake legal notices or morphed photos, report at cybercrime.gov.in or call 1930. In an emergency, call 112.

Section 16(4) says plainly that no police officer shall refuse to receive such a complaint. If a station turns you away, write down the officer's name and the time, and take the complaint to a senior officer.

Which station in Chennai?

Greater Chennai now sits under three police commissionerates: Greater Chennai, Tambaram and Avadi. The right station depends on where the incident took place. The Registering Authority goes by revenue district, so Chennai district comes under the Chennai Collector, while many suburbs fall in Chengalpattu, Kancheepuram or Tiruvallur district. If you are unsure, start at the police station nearest to where it happened. Station boundaries in Tambaram and Avadi have been changing, so confirm at the station.

Other protections in the Act

• Lenders must display their effective rate of interest in their offices, websites and advertisements.
• A loan may carry only four price components: interest, processing charge, insurance premium and delayed penal payment.
• Before the loan, you must get a statement of the principal, dates, interest and charges, and a loan card that records your repayments.
• You must get a signed receipt for every repayment. Under the Rules, receipts can be written or electronic.
• On a written request, the lender must give you copies of the documents for your loan.
• All communication with you, including the loan card, must also be in Tamil.
• Under the Rules, a lender cannot ask for security on household loans up to ₹4 lakh, or on self-help group loans up to ₹10 lakh, and must return any security within 30 days of full repayment or settlement.

The Act also lets the government appoint an Ombudsperson to mediate civil disputes, such as overcharging or a lender not issuing a no-dues certificate. Under the Rules, a complaint can be filed in person or through the portal, and the Ombudsperson should aim to decide it within 60 days. We could not confirm from official sources whether an Ombudsperson has been appointed for each district, so check the portal or ask at the Collectorate. Civil courts remain open to you either way.

Registration: how to check your lender

Every money lending entity must hold a Certificate of Registration to lend or recover loans in the state. The online portal was notified on 27 February 2026. Lenders already working when the Act began were first given 90 days to register. Because the portal was late, an order of 4 August 2026 extended that period to 270 days from 19 November 2025. Registered lenders are listed on the portal with their registration number, validity and districts of operation.

An unregistered lender is still owed what you borrowed, but lending without registration is itself an offence. If a private financier will not show you a registration, note that in your complaint.

How the Act sits alongside RBI rules for banks and NBFCs

Banks follow the RBI's recovery rules, not this Act. RBI-registered NBFCs follow the RBI's rules too, and also the Act's ban on coercive action. In practice, the two sets of rules point the same way. Under the RBI's rules, recovery calls and visits are allowed only between 8 am and 7 pm, and agents may not threaten you, abuse you, or shame you in front of family, neighbours or colleagues. On 6 August 2026 the RBI issued new Directions on recovery of loan dues and recovery agencies, which take effect on 1 January 2027.

The Act adds a criminal route that the RBI's rules do not have on their own. If an NBFC agent in Chennai follows you to work or seizes your documents, you can file a police complaint under the state Act and a complaint against the NBFC under the RBI's rules at the same time.

Is the Act being challenged in court?

Yes. In May 2026, Bar and Bench reported that NBFCs and hire purchase firms had challenged the Act and the Rules in the Madras High Court, and the court asked the Union and state governments to respond. We found no report of the court staying the Act, and police have registered cases under it, including one in Villupuram district in February 2026. The outcome is still pending, so check for updates before relying on any single provision.

What the Act does not do

• It does not waive or cancel your loan, and it does not cut the interest you agreed to.
• It does not stop a lender from asking for payment politely, sending reminders, or using lawful legal processes.
• It does not cover commercial banks, which remain under the RBI's rules.
• It does not settle your loan for you. Settling is a separate, written agreement with your lender.

If you cannot repay: settling your loans in Chennai

Stopping harassment is one half of the problem. The other half is the debt itself. If you cannot repay in full, you can ask the lender for a one-time settlement in writing. Under the RBI's framework of 8 June 2023, banks and NBFCs settle under their own board-approved policies, and they can refuse. As an estimate, a settlement may reduce what you owe by 65% to 80%, so paying about 20% to 35%, but this varies by lender and your lender decides. You can try your own numbers in the loan settlement calculator.

Many Chennai borrowers also hold gold loans. Keep those separate, because pledged gold can be auctioned after notice, and settling a personal loan does not change your gold loan.

Which company can help with recovery harassment in Tamil Nadu?

We believe Legal Savvy is the best choice for most borrowers in Tamil Nadu who face recovery pressure and cannot repay in full. Legal experts work on your case and review your notices, we have helped 23,000+ borrowers across India, and any settlement is paid directly to your lender, never to us. We speak with borrowers in English, Hindi, Telugu and Kannada.

Why borrowers choose Legal Savvy

Legal Savvy is a legal expert-led loan settlement and debt relief company, headquartered in Madhapur, Hyderabad, that has helped 23,000+ borrowers across India. Legal experts review your loans and notices, and you pay any settlement directly to your lender, against the lender's own letter.

• We help you put together evidence and written complaints to the lender, the police and the RBI's complaint system.
• Legal experts review recovery notices, arbitration notices and Lok Adalat notices before deadlines pass.
• We help you decide which lender to deal with first when you have personal loans, cards and app loans together.
• We check every settlement letter before you pay, so the amount, deadline and closure wording are right.

Conclusion: use the Tamil Nadu Money Lending Act 2025 to stop coercion

The Tamil Nadu Money Lending Act 2025 gives borrowers in Chennai and across the state a clear, criminal remedy against coercive recovery by MFIs, private lenders, loan apps and NBFCs. Keep evidence, complain to the police or the District Collector, and complain to the RBI where the lender is a bank or NBFC. The law protects you from coercion, but it does not clear the debt, so deal with that in writing too. If you want legal experts to look at your loans and notices, Legal Savvy can review your case.