The legislation introduces tighter oversight and compliance requirements for lenders operating in the state.

Fusion Finance fell 5.65%, while Utkarsh Small Finance Bank dropped 5.47%. Spandana Sphoorty Financial declined 1.28%, AU Small Finance Bank slipped 1.27%, Equitas Small Finance Bank fell 1.12% and Jana Small Finance Bank was down 0.4% in trade.

The Bill seeks to regulate microfinance institutions and small loan providers, prohibit coercive recovery practices and ensure transparency in lending operations, including fair and clearly disclosed interest rates.

Under the new framework, microfinance companies will be required to obtain prior permission from the state finance department before commencing loan disbursement operations in Bihar. Even entities that already hold a licence from the Reserve Bank of India must register with the state's Director of Institutional Finance before starting business in the state.

Registration will be mandatory within 90 days of the commencement of the Act. Without a valid certificate of registration, valid for three years, no entity will be permitted to grant or recover loans in Bihar. Commencing operations without registration will be treated as a criminal offence.

The legislation also provides for the establishment of special courts in every district, presided over by a first-class judicial magistrate, to hear disputes relating to interest rates and cases where borrowers are alleged to have been driven to suicide due to usurious or coercive lending practices.

Lenders will be required to prominently display the effective rate of interest at their offices, on their websites and in advertisements or brochures. They must also maintain an office in Bihar and execute written loan agreements in Hindi.

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