BANKING TRADE AND COMMERCE

MONEY-LENDERS

SECTION I-BANKING AND FINANCE

Money-lenders.

The institution of money-lenders is as old as money itself. Money-lending was a profitable business and any individual who saved a little of his income practised it by force of habit and custom. However, there was no law which regulated the moneylending business.

Private money-lending took various forms: between bankers and men of business, accommodation in one form or another was often necessary and this was given to persons of well-known financial stability. Such loans were commonly made upon note of hand only or bill of exchange payable in one case at sight (darshani), in the other 30 or 61 days after its execution; and a commission of Re. ¼ to Rs. 2 per hundred was charged. To cultivators loans were made on mortgages of land, and for these the usual rate was 1 per cent per month where the security was good and the reputation of the borrower excellent; 1½ per cent was the ordinary rate for loans to cultivators of substantial standing and 2 per cent or even more was charged in doubtful cases. The lenders were often persons engaged in various other trades, who might require all their capital at very short notice to meet a sudden call, and mortgages were of all forms of property the most unrealisable in an emergency. Grain was sometimes advanced by sahukars on a stipulation that it would be repaid at harvest in a ratio of 5:4 (laoni) or in unfavourable cases 3:2 (wadhi didhi). In Melghat the rates were even higher. The system, however, did not last long, as all the larger firms gave it up. Persons who could neither show well-known credit in the money-market nor produce landed security had to pawn valuables as security for their loans and would then receive the money on terms similar to those in force for mortgages. If they failed to do this they had no choice but to resort to the village Shylock or the Rohilla who dealt in petty loans at high risk and showed but little compassion either in the rates he charged or in his method of collecting debts.

Legislative control became necessary when money-lenders  were found indulging in questionable practices. They took unfair advantage of the illiteracy, ignorance, credulity and  helplessness of the ryots to extract money from them.

Mal-practices of Money-lenders.

The Indian Central Banking Inquiry Committee (1931) enlisted the following as some of the mal-practices followed by the money-lenders: -

(1) Demand for advance interest;

(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 later 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 agriculturist of a substantial part of his income. It was imperative, therefore, to regulate the business of money-lenders by appropriate legislative measures.

C. P. and Berar Money-lenders Act, 1934.

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 Amravati district along with other districts.

The Act was subsequently supplemented in 1939 and amended in 1949. The important addition to the provision 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-lender's Act.

After the reorganisation of States in 1956 the district of Amravati formed part of the then Bombay State and subsequently with bifurcation that of the State of Maharashtra with the result that the rules, regulations and enactments which were already in force in the State were gradually made applicable to Amravati district along with other districts in the Vidarbha region. The Bombay Moneylender's Act of 1946 was thus applied to Amravati district from 1st February 1960. The important provisions of the Act are-

(1) The State Government was authorised to appoint Registrar General. Registrars and Assistant Registrar of Money-lenders and to define areas of their duties.

(2) Every Registrar was to maintain a register of money lenders in his jurisdiction.

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

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

(5) Every money-lender was to keep and maintain a cashbook and a ledger in a prescribed form and manner.

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

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

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

(9) Notwithstanding any law in force, no debtor who cultivated land personally and whose debts did not exceed Rs. 15,000 could be arrested or 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 were the introduction of 4-A and 5-A forms and the "Pass Book" system, provision of calculating interest on Katmiti 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 was 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 the Government were not entirely partial to the debtors. The money-lenders also were given relief when the structure of interest rates was revised as from 5th July 1952. This was done with a view to ensuring a steady supply of credit from the money-lenders. Accordingly, the maximum rates were raised from six per cent to twelve per cent per annum on unsecured loans. The money-lenders were also allowed to charge a minimum interest of a rupee per debtor per year, if the total amount of interest chargeable according to the prescribed rates in respect of the loans advanced during the year amounted to less than a rupee. Although no separate account of money-lenders was maintained during the early years of the present century the following statement would give a rough

idea of the number of persons engaged in various kinds of  financial activities including that of money-lenders in Amravati  district, for the year 1913.

TABLE No. 1

PERSONS ENGAGED IN FINANCIAL ACTIVITIES (INCLUDING MONEY-

LENDING) AMRAVATI DISTRICT, IN 1913

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

During 1959-60 and 1960-61 the number of licences granted for the first time was 24 and 126, respectively, whereas the number of licences renewed was 223 and 521, respectively, bringing the total number of money-lenders in the district to 660 in 1960-61.

The following table gives in detail the Administration of the Money-lenders' Act, 1946, in Amravati district for the years 1959-60 and 1960-61: -

TABLE No. 2

ADMINISTRATION OF THE MONEY-LENDERS' ACT,1946

(FROM 1959 TO 1961)

The following table gives the Tahsil-wise distribution of money-lenders in Amravati district for 1959-60 and 1960-61, respectively: -

TABLE No. 3

TAHSIL-WISE DISTRIBUTION OF LICENSED MONEY-LENDERS

The total amount of loans advanced by the money-lenders  during 1960-61 to traders and persons other than traders in the whole of the Amravati district is given in the following statement:-

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