BANKING TRADE AND COMMERCE

section i

BANKING AND FINANCE

MONEY-LENDERS

Money-lenders.— The institution of money-lenders has come into existence ever since money was accepted as a medium of exchange. The early history of bankers and money-lenders is given in the following paragraphs from the old Gazetteer of Buldhana district.

"The District being purely agricultural cannot boast of any large and influential banking houses. The money-lenders, whose annual profits from their business exceeded Rs. 1,000, numbered 641 at the close of 1907-08. Of these, 449 possessed incomes varying from Rs. 1.000 to Rs. 2.000, 161 incomes varying from Rs. 2.000 to Rs. 5.000, 25 incomes varying from Rs. 5,000 to Rs. 10.000 and 6 incomes varying from Rs. 10,000 to Rs. 20,000. Vishnusa Balkrishnasa Saoji, (Lad Bania) of Malkapur heads the list, but Khamgaon. the leading cotton mart of the District, contains the largest number of capitalists, the principal being Shriram Ramgopal, Ganeshdas Bhatia, Kasturchand Bhikam-chand, Lakshmandas Mihidas. and Jasraj Shriram. The banking firm of Buti from Nagpur has branches at Khamgaon and all over Berar and do a large business on loans advancing sums on personal security at 2 per cent and payable by monthly instalments. Almost every village has its money-lender, who does business on a small-scale. The principal money-lending castes are Marwaris, Kunbis. Lad Banias, Lingayat Banias, Brahmans, and Muham-madans. The Marwaris predominate, forming 62 per cent of the total number."

" The information given in this section with regard to rates of interest must be qualified by the admission that it is not hard and fast: a man's character and standing usually affect the interest more than what he has to offer as security; some men can borrow at even lower rates than those quoted below, and some despite good proffered security can get no loans at all. Unsecured loans can be obtained by Sahukars and rich men from 5 to 9 per cent. It is not common to make such loans to others, but in the few cases in which they are made to well-known regular payees the rates are from 12 to 18 per cent. Loans on personal security are given at rates varying from 12 to 24 per cent, but here also the personal element largely affects the transaction, and the would-be borrower must be known and bear a good character. The rate of interest on loans secured by pledge of moveables varies between 7½ and 9 per cent, if the articles pledged are gold and jewellery, and from 12 to 18 per cent, if they are household utensils, carts, cattle, and the like. "

"An ordinary cultivator can usually obtain a loan to the extent of about 50 per cent of the value of the property mortgaged at rates of interest varying from 12 to 24 per cent. The rate varies according to the capacity of the borrower to repay the loan. A common practice among the tenants or agricultural labourers is to raise loans in small sums usually not exceeding Rs. 100 in amount on bonds with a stipulation for repayment within one year with sawai or 25 per cent, added to the principal. The Kunbi rarely pays up in time and consequently finds himself called upon to pay a penal rate of interest which runs as high as 36 or 37½ per cent per annum. Loans for seed-grain are generally taken in kind. The cultivator borrows the seed. "

It was with a view to putting a stop to the malpractices of the money-lenders and reducing their influence on rural economy that legal enactment was felt imperative. An Act known as the Central Provinces and Berar Money-lenders Act, 1934 was, therefore, passed by the State Government and made applicable to entire Vidarbha region. The Act was in operation till 1956.

Money-lenders Act of 1946: The Bombay Money-lenders Act of 1946 was made applicable to the Buldhana district after the reorganisation of the States when the district formed a part of the State of Bombay. Some of the important provisions of this Act are given below:—

Firstly, the State Government is authorised to appoint Registrar-General, Registrar and Assistant Registrars of Money-lenders for the purpose of this Act and to define areas of their duties. Secondly, every Registrar is to maintain in his jurisdiction a register of money-lenders. Thirdly, money-lenders should not carry on business of money-lending except in the area under licence and except in accordance with terms of licence. Fourthly, the Registrar or Assistant Registrar or any other officer, by this Act, may require any money-lender to produce any record or document in his possession which is relevant for his purposes. Fifthly, every money-lender shall keep and maintain a cash-book and a ledger in a prescribed form and manner. Sixthly, every money-lender shall deliver a clear statement to the debtor about the language, amount, security, etc., of his transactions. Seventhly, the State Government is 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. Eighthly, molestation of a debtor by the creditor in recovery of loans is treated as offence and is to be penalised. And lastly, no debtor who cultivates land personally and whose debts do not exceed Rs. 15,000 shall be arrested or imprisoned in execution for a decree for money passed in favour of money-lenders whether before or after the date on which this Act comes into force.

The Act was subsequently amended. The important amendments related to 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 quarterly statements 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 Registrars 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 were not entirely partial to the debtors. In order to ensure a steady supply of credit from the money lenders, the structure of interest rates was revised as from 5th July 1952. Accordingly the maximum rates of interest were raised from 6 to 9 per cent per annum on secured loans and from 9 to 12 per cent per annum on unsecured loans. The money-lenders were also allowed to charge a minimum interest of one 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.

The following statement gives information about money-lenders.

The statement below shows that their number has steadily declined. There is also a substantial fall in the business undertaken by the money-lenders. The factors which have contributed to this state of affairs are the extension of co-operative credit and tagai loans.

STATEMENT SHOWING THE NUMBER OF LICENSED MONEY-LENDERS IN BULDHANA DISTRICT FROM 1959-60 TO 1967-68.

The following statement shows the advances made by licensed money-lenders in Buldhana district during the years 1959-60 to 1967-68 to traders and non-traders: —

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