BANKING TRADE AND COMMERCE

section i-BANKING AND FINANCE MONEY LENDERS

Money-Lenders: The institution of money-lenders is as old as money itself. The following paragraphs detail the role of money-lenders as given in the old Gazetteer of Akola district Published in the year 1910.

Private Loans.—"Sahukars in all parts of the District have lower rates of interest among themselves than for the public in general. The rate within their own community at Akola depends upon the bank rate and varies immensely at different seasons; elsewhere it is often 8 or 10 annas a month, that is 6 or 7½ per cent, per annum; but it might be as little as As. 6 or as much as As. 12. The rate for other people depends chiefly on the security they can offer but largely also on their position and character and on the season. Legal processes are slow and expensive, and a sahukar requires more interest from a man who may compel him to resort to them than from one in whom he has confidence. When crops are good the rate of interest falls, owing to the decreased demand for loans, but two or three bad seasons make it rise considerably. In a few parts of the District, owing to three successive bad seasons, it is said just now that the sahukars have lent all their capital, or that they are afraid to lend any more on land, and that therefore loans are not to be had at all, but this is very rare. The standard rate for loans on land seems to be from As. 12 to Re. 1 a month for a perfectly safe cultivation, and Rs. 1.8 or Rs. 2 for one of ordinary or poor standing; Rs. 2, sometimes called dohotra, is quite a common rate. In a few places it is said that these rates have been constant ever since the famine of 1899-1900, but generally one hears of a slight rise through the poor harvests of the last few years. On the other hand rates run a little lower than this in an occasional village where there happen to be a number of capitalists. Deductions are occasionally, but rarely, made in the name of a gorokshan, home for cows, and at least one large firm makes other deductions on petty loans. Another system, sawai, is often followed for small loans to poor people, especially for loans made in the sowing season which are to be repaid at harvest. According to the sawai agreement the borrower must repay live-fourths of what he borrowed, and as the period for repayment in these cases is only four or six months the rate comes to 50 or 66 per cent, per annum. Loans to be repaid in kind are now very rare, but in a few villages a man might borrow a maund of cotton seed and return a maund of cotton in the boll. Sahukars complain, truly or otherwise, that people's trustworthiness, iman, has greatly declined during the last generation or two. They say that formerly when a loan was made it was common merely to make a rough memorandum on a scrap of paper and to utter the formula Saksha Parameshwar, God being witness, but now debtors resort to all kinds of fraud, pledging their land, for instance, over and over again to different Sahukars; a few add that the law favours debtors. Borrowers on the other hand complain that a sahukar finds it very easy to get the law on his side in order to enforce unreasonable demands; the rule of damdupal prevents a Hindu from suing for more than twice the original sum lent, however long interest may have been accumulating, but when he comes under this limitation he gets a fresh deed drawn up with the original capital and interest thrown together as its base; again, he may insert in the deed provisions in his own favour which the ignorant borrower wholly fails to understand and a venal sub-registrar omits to explain, for sub-registrars are considered to have wide opportunities for petty exactions and corruption; a third course is said to be easy with the rough account books in use, especially perhaps with the very irregular pathani-wahi-the Indian ink of the entry is rubbed out with a moistened thumb and a fresh entry is inserted. A man in whom a sahukar feels full confidence can still borrow without pledging any properly as security, but it is said that the practice of demanding security is growing. The amount required is as much as will ensure both the return of the original loan and the payment of overdue interest, which at 24 per cent, per annum soon amounts to a large sum. On land or houses sahukars seldom lend more than one-half or one third of the value of the properly, but if gold or silver is left with them in pledge they will lend three quarters of its value."

Malpractices of Money-Lenders.—Legislative control became necessary when money-lenders were found to be indulging in questionable practices. They took unfair advantage of the illiteracy, ignorance, credulity and helplessness of the ryots to extract money from them. The Central Banking Enquiry Committee (1931) recorded the following malpractices followed by the moneylenders.

(1) demand for payment of interest in advance;

(2) demand for a present for doing business;

(3) taking of thumb impression on a blank paper with a view to inserting any arbitrary amount at a latter date if the debtor became irregular in payment of interest;

(4) insertion in written documents of sums considerably in excess of money actually lent; and

(5) taking of conditional sale-deeds in order to provide against possible evasion of payment by the debtor.

Such practices put a serious drag on the agricultural economy of the district since they robbed the agriculturists of a substantial part of his income. It was imperative, therefore, to regulate the business of money-lenders by appropriate legislative measures.

Central Provinces and Berar Money-lenders Act.—With this in view the then Government of the province passed the Central Provinces and Berar Money-Lenders Act, 1934 and made it applicable to Akola district along with other districts of the Vidarbha region.

The Act was subsequently supplemented in 1939 and amended in 1949. The important addition to the provisions of the Act in 1939 was that the Act was deemed to be in force with effect from the 1st April 1935. According to the amendment Act (1949) the registration certificates granted before 1st April 1949, were to cease from being operative with effect from the date so appointed. The persons holding such certificates were entitled to refund of the registration fee in such cases.

Bombay Money-Lenders Act.—After the reorganisation of States in 1956 and again in 1960 the district of Akola formed part of Maharashtra with the result that the rules, regulations and enactments which were already in force in the State were gradually made applicable to Akola district along with other districts in the Vidarbha region. The Bombay Money-Lenders Act of 1946 was thus applied to Akola district from 1st February 1960. The important provisions of the Act are:—

(1) The State Government is authorised to appoint Registrar General, Registrars and Assistant Registrars of Moneylenders and to define areas of their duties.

(2) Every Registrar is to maintain a register of moneylenders in his jurisdiction.

(3) Money-lenders are not to carry on business of money-lending except in the area under licence and except in accordance with the terms of licence.

(4) The Registrar, the Assistant Registrar or any other officer is authorised to demand from any money-lender the production of any record or document in his possession which is relevant for his purposes.

(5) Every money-lender is to keep and maintain a cash book and a ledger in a prescribed form and manner.

(6) Every money-lender is to give a specific statement to the debtor about the language, amount, security, etc.

(7) The State Government is authorised to fix maximum rates of interest for any local area or class of business of money in respect of secured and unsecured loans.

(8) Molestation of a debtor by the creditor in recovery of loans is to be treated as an offence and is to be penalised.

(9) Notwithstanding any law in force, no debtor who cultivates land personally and whose debt does not exceed Rs. 15,000 can be arrested and imprisoned in execution of a decree for money passed in favour of a money-lender whether before or after the date on which the Act came into force.

The Act was subsequently amended. The important amendments made are the introduction of 4-A and 5-A forms and the "Pass Book" provision of calculating interest on katamity system and facilities to certain classes of money-lenders permitting them to submit a quarterly statement of loans to the Registrar of Money-lenders. Further amendment was effected in 1955 by which money-lending without licence is made a cognisable offence.

In the following year special measures were adopted for protecting Backward Class people. The Registrar and the Assistant Registrars were instructed to take special care while checking the accounts of money-lenders in respect of their transactions with Backward Class people.

The regulations enacted by Government are not entirely in-favour of the debtors. The money-lenders also are given relief when the structure of interest rates is revised as from 5th July 1952. This has been done with a view to ensuring a steady and adequate supply of credit from money-lenders. Accordingly, the maximum rates are raised from six per cent to twelve per cent per annum on unsecured loans. The money-lenders are also allowed to charge a minimum interest of a rupee per debtor per year, if the total amount of interest chargeable according to the loans advanced during the year amounted to less than a rupee.

Since the application of the money-lenders Act the moneylenders are required to apply to the Assistant Registrar of Moneylenders in the district for either grant of licences or for their renewal, as the case may be, before they can carry on any money-lending operations. Formerly, the money lending business in the district was controlled by the Assistant Registrar of Moneylenders. Since March 1961 the Assistant Registrar of Co-operative Societies works as Assistant Registrar of Money-lenders as well.

The following table gives an idea regarding the number of money-lenders in the district in the years 1961-62 and 1965-66 and credit given by them to traders and non-traders during the same period.

TABLE No. 1

Number of Registered Money-Lenders and Loans advanced by them in Akola District during 1961-62 and 1965-66

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