s 17 Prohibition of compound interest
(1) Any moneylending agreement made on or after the commencement of this Act, for the loan of money by a moneylender shall be illegal in so far as it provides, directly or indirectly, for the payment of compound interest, or for the rate or amount of interest to be increased by reason of any default in the payment of sums due under the moneylending agreement: Provided that provision may be made in any such moneylending agreement that if default is made in the payment upon the due date of any sum or instalment payable to the moneylender under the moneylending agreement, whether in respect of principal or interest, the moneylender shall be entitled to charge simple interest on the unpaid sum or instalment which shall be calculated at the rate of eight per centum per annum from day to day from the date of default in payment of the sum or instalment until that sum or instalment is paid, and any interest so charged shall not be reckoned for the purposes of this Act as part of the interest charged in respect of the loan. (2) This section shall not apply to transactions known as Thavannai transactions, between one moneylender and another moneylender, provided that any such transaction is evidenced by a written document duly stamped. (3) (Deleted by Act A1193).