This week Kuensel reported on the proposed revisions to the Private Money Lending Rules (PMLR) 2020.  This rule states that the rule is framed under sections 5, 202 and 362 (e) of the Financial Services Act (FSA) of Bhutan 2011. Section 5 provides rulemaking authority; section 202 provides rule-making authority pertaining to granting a license and Section 362(e) empowers RMA to regulate other services which are financial in nature. The question is whether private money lending constitutes a financial service within the scope of FSA. Section 371 of the FSA defines financial services as “banking business, insurance business, securities business and all other services.” This means, there is no definition of other services in both the PMLR 2020 and FSA.

 On the other hand, Sections 11 and 15 of FSA prohibits any person including individuals from providing financial services or business and violation is a serious criminal offence including imprisonment from “fifteen to thirty years.” The only exemption is provided under Section 16 if the authority determines as limited scope, and such entity will be able to function as if they are licensed in terms of compliance and provides “equivalent degree of protection as if the person were subject to regulation and supervision under this Act”.  Therefore, allowing private lenders under PRML to operate money lending business without obtaining a license if the amount is up to Nu 90,000 with interest seems to be repugnant to the Act.

More importantly, the proposed revision to PMLR contains numerous penalties including criminal sanctions and imposes duties the courts. For example, the proposed revision to rule no. 7 states “the court shall admit and register all the private money recovery suits if there is a prima facie case of lending.” Such provisions need a thorough judicial review as it challenges the existing laws. For example, Section 2 of the Civil and Criminal Procedure (CCPC) clearly provides judicial independence and Section 31 and 32 contains a similar provision gives discretion to the court to determine whether to admit any case or not. But the new proposal already sets criteria for the courts.   

The central concern about this rule is that while FSA does not provide either expressly or implied on the regulation of private money lending, the implementing institution is using unclear and ambiguous provisions to come up with such regulatory framework including serious criminal sanctions affecting people’s life, liberty, and security.  Such practice can set precedence among other executive entities to come up with their own regulations to fulfil their own interests and to expand their authority on the people.

Recognizing such vulnerabilities and possible abuse, Article 1 (13) of our Constitution sets a clear separation of power and Article 10 (1) protects the legislative prerogative of the parliament. Further, the preamble of our Constitution starts with “we the people” meaning power belongs to people manifested through the collective will of the people.  Our legislature is vested with this collective will and legislative prerogative. Therefore, if private money lending is a serious national issue, relevant institutions must notify the legislature including proposals for amendment of existing laws to incorporate necessary provisions especially if any provision affects a person’s freedom of life, liberty, and security. To protect and strengthen the sanctity of democratic principles, any executive entity must refrain from becoming a law maker. 

Sonam Tshering

Lawyer, Thimphu

Disclaimer: The views expressed in this article are author’s own.