BANKING TRADE AND COMMERCE

section i-BANKING AND FINANCE

Money-Lenders.

The system of money-lending might be said to have originated with the introduction of coinage and currency in this country. The earlier forms of monetary dealings were not governed by any rule or law. The old Gazetteer has to say the following in regard to money-lenders and their activities.

" Of all forms of investment, money-lending is the commonest. Money-lending is practised in different degrees by members of almost every class. The leading professional money-lenders are Brahmans. Gujrat vanis, Marwar vanis, Jains, Lingayats, Marathas and Musalmans. Few live solely by money-lending. (The Brahmans are husbandmen, land' proprietors and to a small extent, pensioned Government servants and pleaders. Gujrat, Lingayat and Marwar vanis are mostly traders and in some cases landholders). It was generally coupled by some such calling as trade or. husbandry. Except

Marwar and Gujrat vanis the large money-lenders and landholders from a regard to their good name and from kindly feeling treat their debtors with a certain amount of leniency. The small lenders cannot afford much kindness and treat their debtors with considerable strictness.

" Professional money-lenders may be roughly arranged under three chief classes, large, middle and small. The first or the substantial hanker or savkar carries on a considerable business in bills or hundis and is careful to make advances only to persons of substance and on good security. The large landholders are often hopelessly in debt to large money-lenders. The lenders are generally careful to keep their debtors' heads just above water, in some cases from good feeling, but in most, because the process is more profitable than foreclosure. Most of the bankers' dealings are with other money-lenders. First class lending and trading firms keep the journal or kird, the ledger or khatawani and four bill books, an advice book of bills drawn by the firm, a register of the firms' acceptances in favour of third parties, a register in favour of the firm, and a rough memorandum book.

"The second or middle class of lenders form the greater portion of the most respectable lenders of the present day. They are those who with no great capital lend money in smaller sums and at higher rates than the first class but still carefully and on good security and who are glad to avoid the courts. This class in most cases keep the day book and ledger and have a capital of £1,000 to £ 3.000 (Rs. '10,000 to Rs. 30,000).

" The third class of small lenders have little or no capital. They borrow from wealthy firms and lend small sums to poor borrowers at extremely high rates. Lenders of this class keep the most meagre accounts. Their transactions are on mortgage, personal security and pawn. All of their agreements are on the hardest terms as the security is generally doubtful and the debtor and creditor are little removed from one another in neediness and dishonesty. The best of this class keep at least the accounts termed pathani or tipane or rough memorandum book and khatawani or ledger. The lowest and the host of unprofessional lenders keep no record of their transactions except the bonds which are employed on almost every occasion. The debtor is rarely furnished with a receipt.

" In fixing the terms of a loan every circumstance in the case has its weight. The urgency of the occasion and the condition and credit of the borrower make a vast difference on the rates charged. On easily convertible movable property and on good landed security large sums may be borrowed at six to twelve per cent a year. For smaller sums and in ordinary pawn transactions the rate ranges to eighteen per cent. On unsecured debts a husbandman of scanty credit has generally to pay 24 to 37½ or even 40 per cent. Mortgages are sometimes charged more heavily than personal bonds. "

The old District Gazetteer mentions that the borrowing class was composed of stipendiary Government servants, including those of the lower grades, traders and husbandmen. Of these the district and village hereditary Officers were nearly always in debt, their land in many cases being mortgaged for two to three generations. The bulk of the local traders were also poor and had to borrow to renew their stock on strict terms and high rates of interest. Middle class traders renewed their stock by pawning ornaments as security and paying ten to eighteen per cent interest per annum. But of all the borrowers, except the labouring class, husbandmen were the worse off. A significantly large portion of them raised loans by mortgaging land, houses or other immovable property or secured loan on personal security. Money was required to pay the Government assessment and to meet the extraordinary expenses of marriages and other family events. In a number of cases, they had also to borrow for subsistence except for the harvesting period. In some cases, the money-lenders, who were also shopkeepers, used to advance grain on the system known as vadhi-didhi, that is one and a half increase. This system sometimes pressed hard on indigent cultivators.

" It is the general opinion in the district that, however, much the district may have increased in trade, wealth and resources since it came under British rule in 1848, the indebtedness of the landholding classes is not less but greater than it then was. " [Gazetteer of the Bombay Presidency, Vol. XIX, Satara (1885), p. 186] The same situation further led to what is known as the agrarian riots or the Deccan riots.

This state of affairs did not continue for long, and the conditions of the agriculturists improved especially after the passing of the Deccan Agriculturists' Relief Act in 1879. The Act intended to reduce the aggregate indebtedness of the farmers and restrict the transfer of land from cultivators to money-lenders. Although this Act brought some relief to the debtors, especially the agriculturists who were in a majority among the borrowers, the money-lenders continued to be the source of trouble by the harsh and coercive methods they adopted in recovering their dues from their clients, such as ' girah kholai', general manipulation of the accounts to the disadvantage of the debtor, insertion in written document of sums considerably in excess of money actually lent, taking of conditional sale deed in order to provide against possible evasion of payment and so on.

In order to free the agriculturists from their clutches and to check the malpractices the then Government of Bombay province passed on the 17th September 1947 an Act known as the Bombay Money-lenders' Act of 1946.

Bombay 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 define areas of their 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 molestation of 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 cultivated land and whose debts did 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 for submitting 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 cognizable 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 accounts of money-lenders in respect of their transactions with backward class people.

Steps were also taken to induce money-lenders to advance more money. The structure of interest rates, too, was raised and came into operation from 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, monev-lenders were allowed to charge a minimum interest of rupee one 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.

In the following tables, is given statistical information about money-lenders, subsequent to the passing of the Bombay Money-lenders' Act of 1946, in the Sangli district.

TABLE No. 1

TRANSACTIONS OF MONEY-LENDERS FROM 1947-48 TO 1961-62, SANGLI DISTRICT

TABLE No. 1—contd.

TABLE No. 2

TALUKA-WISE DISTRIBUTION OF MONEY-LENDERS, FROM 1957-58 TO 1961-62 IN SANGLI DISTRICT

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