BANKING TRADE AND COMMERCE

 MONEY-LENDERS

The section describes in detail all these changes in the financial setup of the district as well as gives an account of some of the schemes recently introduced by the Government to augment its financial resources such as the small savings movement, which was started with a view to secure whole-hearted co-operation from the people to build up a mighty reserve out of the petty savings of the individual citizens which usually go unattended and the establishment of the Life Insurance Corporation consequent upon the nationalisation of the insurance business in the year 1956.

Towards the end of the last century the only institution carrying on financial operations was that of money-lenders. This age-old institution served a very useful purpose by catering to the financial needs of urban and rural population of the district. The old District Gazetteer of the Satara District describes their functions in the following manner.

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, Gujarat Vanis, Marwar Vanis, Jains, Lingayats, Marathas and Musalmans. Few live solely by money-lending. The Brahmans are husbandmen, land proprietors, traders, and to a small extent, pensioned Government servants and pleaders. A few of them have large capital and combine money-lending with trade as their chief calling.

Gujarat, Lingayat and Marwar Vani money-lenders are mostly traders and in some cases land-holders.

Classes of Money-lenders.

Professional money-lenders may roughly be arranged under three Chief classes-large, middle and small. The first or the substantial banker 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 land-holders are often hopelessly' in debt to large money-lenders.

The second or middle class of lenders forms 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 keeps the day-book and ledger.

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. Besides, debtors are tied down to the creditors and can seldom afford to be dishonest.

In fixing the terms of a loan every circumstance in the case has its weight.

According to the returns received, on easily convertible moveable property and on good landed security. large sums were borrowed at six to twelve per cent, a year. For smaller sums and in ordinary pawn transactions the rate increases to eighteen per cent. In transactions on personal security a well-to-do borrower may raise a loan as cheaply as at nine per cent. On the other hand, hardly any limit can be set to what a destitute borrower may have to pay. On unsecured debts a husbandman of scanty means has generally to pay twenty-four to 37½ or even forty per cent.

As in old days, there are few people who do money-lending as their sole business. Many of the shop-keepers and merchants who are, generally Gujaratis, Jains or Vanis, advance sums on interest. Money-lending therefore, has always been found combined with some other business.

The 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 money-lenders 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 money-lenders under their purview. Financial assistance to agriculturists by the Government was also responsible to a certain extent in ebbing the importance of money-lenders.

Despite the fact that the importance of money-lenders has been continuously on the decline since the Second 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 Rank 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 banker. His methods of lending money are quite simple and flexible and are 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 their 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 payments—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 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 to 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 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 Act; passed restricting to a certain extent the activities of the money lenders 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 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.

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 is only after the Act was passed that maintenance of accounts and registers became obligatory on the money-lenders. A systematic account of their advances is, therefore, available only since 1947. The following table gives the financial transactions of money-lenders since that year:—

TABLE No. 1.

TRANSACTIONS OF MONEY-LENDERS FROM 1947-48 TO 1957-58, DISTRICT SATARA.

TABLE No. 1.  contd.

*separate figures are not available.

The table indicates some of the broad treads of the money-lenders' business in the Satara district since the Money-lenders' Act came into operation. In the first instance, it will be seen that the total amount of money advanced by the money-lenders shows every year considerable increase from 1947-48 to 1950-51. Thereafter, there is a general decline in the total amount of advances with slight variations from year to year. The fall continues till 1957-58 when, again, a considerable rise is to be seen in the total sum lent. Taking into consideration the fact that the number of money-lenders in the district has risen, although gradually, during recent years, this sum does not show any great improvement over former years. In a number of eases we do not find any rise in the amounts of loans advanced individually.

Secondly, there appears to be a definite decline in the sums lent to the farmers. This decline in the total amounts can be traced to the fact that many of them have benefited through the liberal assistance of State in the form of " Tagai " or help to grow more food.

Thirdly, loans advanced to traders do not show any increase. This might be due to the stringency of the rules under which money-lenders have to advance loans.

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