BANKING TRADE AND COMMERCE

MONEY LENDERS

As far back as the fifties of the last century there were no banking establishments worth the name in Kolaba district. Monetary transactions were carried on by private money-lenders in towns and villages. [Prominent among the money-lenders were Gujarat Vanis, Marwari Vanis and Brahmins, Sonars, a few Marathi Vanis and Musalmans. A few Prabhus, Malis, Kolis, Kasars, Shenvis and Bene-Israels, and in the small villages Agris, also lent money.] Almost all the smaller usurers had some other calling such as shop-keeping or husbandry. In short, any one who had made some savings advanced them at interest to needy and reliable persons.

There was no regular system of book-keeping. The accounts were written either in Marathi, Gujarati or in Marwari script. Some kept a rough daybook, kachha-kharda, in which all transactions were at once recorded in detail; some kept a proper daybook, rojmel, in which entries were made at intervals of a week or as it suited the account-keeper; some kept the baithi khatavani in which the borrower entered in his own band the sums borrowed, if necessary, with a stamped-receipt fixed, the lender entering sums paid from time to time on the opposite side. Money-lenders were sufficiently protected by bonds and mortgage deeds or by pawned ornaments. Advances were made either in cash or in kind or both.

In 1854, according to the old Gazetteer of the district the yearly cash rates of interest to rich borrowers varied from 7 to 9 per cent against pawned articles, and from 12 to 15 per cent on personal credit; to middle-class borrowers with small estates, the rates varied from 18 to 37 per cent; and to husbandmen and labourers from 46 to 200 per cent. In 1882, in rates of interest in small dealings when an article was pawned, varied from one per cent to 3¼ Per cent a month; in petty agricultural advances both on personal security and/or on a lien on crops, from 1½ to 3¼ per cent a month; in large dealings, with a mortgage on immovable property, from three quarters in Nagothana to one per cent in Mahad; and to labourers, on their personal security and that of friends, from one and a half to two per cent a month. In dealings with the poorer husbandmen, especially when grain was advanced, interest was charged in kind and the crops made security, manoli, for the payment of interest.

Land mortgages were very common. Many Kunbis, Kolis, and Agris raised money to meet their marriage and other family expenses by mortgaging their lands. Case's where labour was mortgaged were not infrequent. About one-sixteenth of the cultivating and labouring classes were believed to mortgage their labour to money-lenders, obtaining in return money to be spent on occasions like marriages or other requirements.

In many cases where labour was mortgaged it never became personal. The debtors generally fulfilled their engagements and did not leave their masters' service for better paid employment. Besides land and labour, standing crop was pledged as security, as stated above. Thus, in Mahad and Mangaon nearly all, and, in the rest of the district, at least half of the husbandmen, who were registered occupants, had to borrow on the security of the growing crop.

This influence of money-lenders has been undermined by a number of economic developments during the inter-war period and after. With the emergence of modern banking organisations and the spread of the co-operative movement, the importance of moneylenders has diminished considerably. The scope of money-lenders' activities was further restricted when with a view to relieving the agriculturists from their ancestral debts and the harassments by money-lenders, the Government enacted laws bringing the moneylenders under their purview. Financial assistance to agriculturists by the Government was also responsible to a certain extent for the ebbing importance of money-lenders.

Despite the fact that the importance of money-lenders has been continuously on the decline since the Second World War, it cannot be denied that they still occupy a dominant position in the over-all credit structure of our country, especially in its rural parts. According to the "Rural Credit Survey Report" (published in 1954) of the Reserve Bank of India the private agencies taken together supplied about 93 per cent of the total credit requirements of the cultivators, of which money-lenders accounted for more than 70 per cent.

The money-lenders' class is different from that of indigenous bankers. The money-lender does not accept deposits from the public, is not particular about the purpose for which the loan is contracted and does not insist upon security unlike the indigenous hanker. His methods of lending money are quite simple and flexible and more easily understood by the people.

Broadly, these money-lenders can be placed into two categories- the town money-lender and the village money-lender. The field of operation of the former is larger than that of the latter. His clients are mainly petty merchants, workers and salaried employees and occasionally small industrialists. The village money-lender, on the other hand, advances loans usually to agriculturists.

It is no doubt true that the money-lenders as a class are of immense use to the rural community in the sense that they meet with its credit needs. However, the methods they adopted in recovering their dues from their clients were harsh and coercive. The demands for advance interest from the clients, and for a present for doing business known as "girah kholai" (purse opening), deceiving the clients into giving thumb impressions on a blank paper with a view to inserting any arbitrary amount at any date if the debtor became irregular in the payment of interest, general manipulation of the account to the disadvantage of the debtor, insertion in written document of sums considerably in excess of money actually lent, and taking of conditional sale deeds in order to provide against possible evasion of payment, these and such other malpractices were extremely harassing to the clients.

Money-lenders Act of 1946.

In order to check such malpractices of money-lenders and to relieve the agriculturists from their clutches, the then Bombay State passed, on the 17th September 1947, an Act known as the Money-lenders Act of 1946.

Under the provisions of this Act the State Government is authorised to appoint Registrar General, Registrars and Assistant Registrars of Money-lenders for the purposes of the Act and to define areas of duties. Licensing and maintaining of cash-book and ledger in a prescribed form and manner was made compulsory for the money lenders. The latter were further prohibited from molesting a debtor while recovering loans. Molestation, in fact, was treated as an offence and was to be penalised. Arrest and imprisonment of a debtor who personally cultivates land and whose debts do not exceed Rs. 15,000 were also prohibited.

This Act was subsequently amended, the important amendments being the introduction of forms 4-A and 5-A and 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 1956, special measures were adopted for protecting Backward Class people. The Registrars and Assistant Registrars were instructed to take special care while checking up accounts of money-lenders in respect of their transactions with Backward Class people.

Steps were also taken to induce money-lenders to advance more sums or to call forth capital that was shy due to a number of Acts passed, restricting to a certain extent the activities of the moneylenders in favour of the debtors. The structure of interest rates, too, was raised and came into operation on 5th July 1952. Accordingly, the maximum rates of interest were raised from six per cent to nine per cent per annum on secured loans and from nine per cent to twelve per cent per annum on unsecured loans. In addition, money-lenders were 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 loans advanced during the year amounted to less than a rupee.

Before the Money-lenders Act of 1946 came into operation there was no law nor executive effort on the part of Government to assess the amount of money advanced as loan by the creditors. It was only after the Act was passed that maintenance of accounts and registers became obligatory on the part of money-lenders. A systematic account of their advances is, therefore, available only since 1947.

Although the structure of interest rates was raised in favour of money-lenders there is no substantial increase in the number of licensed money-lenders in the district. According to the Annual Administration Report of the Bombay Money-lenders Act, 1955-56, "Money-lenders 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". During the year 1957-58, for example, there were only 159 money-lenders holding valid licences in the district. Mangaon taluka was having thirty-two, the highest number of money-lenders while Alibag and Khalapur followed with 23 and 21 money-lenders, respectively. The talukas of Murud, Sudhagad, Uran and Mhasla had comparatively a very small number of moneylenders.

During 1958-59 the total number of money-lenders increased only by two over that of the previous year. The loans to traders and non-traders during the same period amounted to Rs. 8,29,463 and Rs. 19,85,503 respectively. In the next year the corresponding figures were Rs. 11,83,317 and Rs. 12,88,904, respectively. During 1959-60 nine moneylenders discontinued their business.

It will be seen, however, that since the transfer of administration of the Bombay Money-lenders Act, 1946, to the Co-operative Department and due to the creation of the post of Inspector of Money-lenders for the District, the number of money-lenders holding licences under the Bombay Money-lenders Act has shown an increase every year.

The traditional tendency of the villagers is not to move up with the times and not to adapt themselves to the new methods of credit institutions. As the villagers are backward and illiterate they go to village Sahukars for their monetary needs. The village Sahukars are highly influential and, therefore, sometimes it is found very difficult to bring them to book when they do not obtain licences under the Bombay Money-lenders Act, 1946. Most of such business is transacted orally and as such it is difficult to set the law against them. Every effort is made to inquire thoroughly into the complaints of illicit money-lending and to sec that the various provisions of the Bombay Money-lenders Act, 1946, are properly administered in the district in the best interest of the backward, and needy debtors.

TOP