FINANCE

MONEY-LENDERS

At the time the old District Gazetteer was published, there were no large banking establishments, except in Jalgaon, in the Khan-desh district. There were, however, professional money-lenders who belonged to the commercial classes in the community. Of these the hankers or sarafs dealt with urban people and well-to-do husbandmen and the rest with the comparatively poorer classes of villagers who also supplemented their needs by borrowing from village headmen, better placed cultivators and shop-keepers. Besides the professional money-lenders there were also low assurers, who, for short periods, lent small sums at heavy rates to the poorest borrowers.

The money-lenders dealing with urban people and well-to-do cultivators used to keep a journal or rojkird and a ledger, khata-vani, whereas those advancing petty loans to poorer classes kept only the baitha khata, where entries were made without being posted in the journal or day-book and all transactions were based on written bonds. The former sometimes kept two journals, a rough book for entering daily transactions and a correct book or "mela" for weekly and monthly transactions. Final settlement of accounts was made every year in the diwali holidays.

Interest was charged monthly and an addition was made for any intercalary month that might be included. Rate of interest varied according to the personal credit of the loanee. In smaller transactions the yearly rate varied between 9 and 24 per cent and in bigger ones between 6 and 12 per cent. Both town and village money-lenders often advanced grain for seed. Sometimes the financial assistance extended to the cultivator was used by them to support their families during rainy season. Another mode of raising grain or money was by Jalap, that is, by pledging or selling the sown or grown crop at a rate far below its probable out-turn. Land mortgages were also very common in those days. At some places, the practice of raising money by mortgaging one's labour was also prevalent.

Much of this old order has changed during the last seventy years or so due to the rapid expansion of banking organisation in the district and the important role played by the co-operative agencies in the supply of credit to the district populace. The revision of legal enactments in favour of agriculturists which curbed the nefarious activities of money-lenders and brought them under the purview of stringent rules and regulations, on the one hand, and the liberal policy adopted by the State in granting financial assistance to the agriculturists, which considerably narrowed the scope of their activities, on the other hand, have also contributed towards this change. Although State regulations have resulted in a shrinkage of financial activities of the money-lenders, it has been more than compensated by the growth of co-operative societies and establishment of the State Bank. Following is an account of the historical role played by the institution of money-lenders in the district and their present position.

According to the All India Rural Credit Survey conducted by the Reserve Bank of India the private agencies taken together supplied about 93 per cent of the total amount borrowed by cultivators. Out of them money-lenders accounted for nearly 70 per cent ot the credit.

The money-lenders stand in a class by themselves as compared to indigenous bankers. They do not accept deposits from the public, are not particular about the purpose for which the loan is taken and do not: insist upon security unlike the indigenous bankers. Their methods of lending are simple and flexible, and people, more especially farmers, find it easy to accommodate and adjust themselves to the conditions laid down by them.

Various classes of Money-lenders. As a class they include a conglomeration of individuals. Very few of them carry money-lending exclusively, but often combine with money-lending some other business. Classified on the basis of their area of operations, money-lenders will be either urban or rural. The field of operation of the former is larger than that of the latter. His clientele belongs to the merchant community, the working class and the salaried employees and occasionally indigenous artisans. The village money-lender, on the other hand, advances loans usually to agriculturists.

In spite of the useful contribution of money-lenders towards the supply of urban or rural credit they were reported to have been indulging in nefarious practices while dealing with the public and were said to be following the most harsh and coercive methods in the recovery of loans from their clients. As far back as 1870 complaints in this regard were very general in the then Khandesh district. The farmers unable to pay their dues due to conditions of extreme poverty fell easy victims to the obnoxious practices of the money-lender. The clients usually received less than the sum entered in the bond. No receipts were passed for the instalments paid. Fresh deeds were drawn up and fresh charges made without the knowledge of the debtor. These exactions were carried out to exploit the farmer to the fullest and at times even to attach his most valuable possession—land. A casual occurrence of these practices is not uncommon even to date.

The Central Banking Enquiry Committee has listed many of these malpractices of the money-lenders such as demand for advanced interest, demand for a present for doing business known as girah kholai (purse opening), 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, general manipulation of the account to the disadvantage of the debtor, insertion in written documents of sums considerably in excess of the money actually lent, taking of conditional sale-deeds in order to provide against possible evasion of payment by the debtors, etc.

The Agricultural Finance Sub-committee appointed by the Government of India under the chairmanship of Prof. D. R. Gadgil in its report of 1945 thus noted:

"While it is true that the money-lender is the most important constituent of the agricultural credit machinery of the country, it is not possible to justify many of his practices and the charges he makes for his services. Very often these charges are out of all proportions to the risk involved in the business and constitute only exploitation of the borrower. Nor is the agricultural economy of the country in a position to bear the strain of his extortion. The credit dispensed by him instead of contributing to the agricultural prosperity of the country serves as a serious drag on it."

Money-Lenders Act of 1946.

Money-Lenders Act of 1946.—It is with a view to checking such objectionable practices of the money-lenders and to relieve the agriculturists from their clutches that the then Bombay State passed on 17th September, 1947, the Money-Lenders Act. Following are some of the important provisions of the Act: —

(1) The State Government is authorised to appoint Registrar-General. Registrars and Assistant Registrars of Money lenders for the purposes of this Act and to define areas of their duties

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

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

(4) 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.

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

(6) Every monev-lender should deliver a clear 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 treated as offence and was to be penalised.

(9) Notwithstanding any law for the time being in force, no debtor who cultivates land personally and whose debts do not exceed Rs. 15,000 shall 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 this Act comes 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 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. Thus Registrars and Assistant Registrars were instructed to take special care while checking the accounts of money-lenders in respect of their transactions with Backward Class people.

Rate of Interest.

The regulations enacted by the 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 were raised from six to nine per cent per annum on secured and nine to twelve per cent per annum on unsecured loans. The moneylenders 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. The moneylenders, however, did not favourably react to this revision of the structure of interest rates. As the Annual Administration Report: of the Bombay Money-Lenders Act. 1955-56. remarks: "moneylenders as a class are naturally averse to being regimented into any system of maintaining accounts with the concomitant limitations of the lending rates of interest". In the year 1956-57 for which the figures for this district are available there were in all 343 licensed money-lenders. The Jalgaon taluka accounted for the highest number of licensed money-lenders, viz., 55. The lowest number, viz.. four was recorded in the Edlahad Peta.

The following table indicates the total business transacted by the money-lenders in the district: —

TABLE No. 1

 LOANS ADVANCED BY MONEY-LENDERS TO TRADERS AXD NON-TRADERS IN THE JALGAUN (EAST KHANDESH) DISTRICT.

The foregoing table reveals some of the broad trends of money-lending business in the district.

Loans advanced.

Loans were advanced to traders and non-traders against the security of gold and silver ornaments, utensils, promissory notes, etc. Interest charged was at the rate of nine per cent on secured loan and twelve per cent on unsecured loan as per section 25 of the Bombay Money-Lenders Act, 1946.

The amount of loans advanced to traders by money-lenders not exempted under section 22 of the Act decreased from Rs. 15,92,739 in 1940-50 to Rs. 6,68.135 in 1954-55 and Rs. 8,14,547 in 1955-56 (which shows a slight increase over the year 1954-55). On the other hand, loans advanced to non-traders by money-lenders not exempted under the Act reveal a substantial increase. For example in 1955-56 a sum of Rs. 36,23,340 was advanced as against the sum of Rs. 15,91,352 in 1948-49. Similar increase could be noted in the amount of loans to non-traders by money-lenders exempted under section 22 of the Act. For example, the stun of Rs. 11,12,234 was advanced in 1948-49 and that of Rs. 72,43.440 in 1952-53

Another tendency that is visible is a steady fall in the number of money-lenders holding valid licences in the district during the last few years. From 502 in 1948-49 the number decreased to 376 in 1950-51 and to 355 in 1955-56. The decrease could he attributed to two factors, viz., the grant of tagai loans by the Government, to the cultivating classes, and withdrawal of money-lenders from their traditional business and regulations sub-sequent to the enactment of controlling their business activity. This decrease, however, could not be checked even with the recent increase in the maximum rates of interest. This is a clear indication of the fact that importance of the institution of money-lenders is gradually on the decline. They will, however, continue to play their role in the credit structure of our economy at least for some years to come fill the co-operative movement spreads vigorously so as to effectively cope with the increasing demand of the people.

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