Section 18

Any contract 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 contract:Provided that provision may be made by any such contract that if default is made in the payment upon the due date of any sum payable to the moneylender under the contract, whether in respect of principal or interest, the moneylender shall be entitled to charge simple interest on that sum from the date of the default until the sum is paid, at a rate not exceeding the rate payable in respect of the principal apart from any default 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.

Subsection (1) 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.

Subsection (1) shall not apply to loans or advances by a moneylender on current account where interest is payable on the daily balances with monthly or more extended rests at a rate not exceeding 15% per annum.