FINANCE

Money-Lenders

The institution of money-lenders is as old as money itself.  Money-lending was a profitable business and any individual who saved a little of his income practised it by force of habit and custom.  However, there was no law which regulated the money-lending business.  Private money-lending took various forms.  Between bankers and businessmen, accommodation in one form or another was often necessary and this was largely the sphere of persons of well-known financial stability.

The following account gives the early history of money-lenders in Bhandara district.  "A somewhat peculiar feature of the District finance is that the leading bankers reside in Nagpur.  Generally, therefore, the relations between debtor and creditor are of a purely commercial nature and lack the consideration which is sometimes shown by malguzars to their own cultivators.  On the other hand, some of the Nagpur bankers, notably Mr. Chitnavis and Raja Raghuji Rao Bhonsla were most generous during the conciliation proceedings.  The most important of the Nagpur bankers are Krishna Rao Amrit Buti, Ramchandra Amrit Buti, Jageshwar Murlidhar Buti, Balaji Vinayak Buti, Atmaram Amrit Buti, Narayan Shridhar Naik of Umrer, Mr. G. M. Chitnavis, and the Bhonslas.  The chief among the local creditors is Ganpar Rao Yadava Rao whose business extends all over the District ; the zamindars of Gond-Umri and Amgaon, and the Kunbi proprietor of Saoli-Dongargaon. Many of the local Marwari money-lenders suffered heavily in the famines and are now involved.  A new class of small creditor has risen from the Mahar caste.  These men have given up drinking and lead an abstemious life, wishing to raise themselves in social estimation.  Mr. Napier found twenty or more village kotwars carrying on money-lending transactions on a small scale, and, in addition, many of the Mahars in towns were exceedingly well off."

"The rates of interest on private loans are the same as in other Districts.  Large proprietors can get money at 6 per cent, while ordinary malguzars and tenants have to pay from 12 to 24, or even higher rates.  Grain-loans of rice are usually made at 25 percent to reliable borrowers.  The Court of Wards tried the system of making advances of grain at 12 ¹/₂ per cent, but found that is did not pay owing to the expense of storage and watch and ward.  Oil-seeds are lent at the rate of 50 to 100 per cent.  A number of Pathan money-lenders have settled in the District and make small advances at exorbitant rates to the poorer classes.  They often charge interest at 2 annas a rupee a month or 150 per cent and extract payment by methods of terrorism.  Rai  Bahadur Anant Lal gives an interesting account of the dishonest methods of the smaller money-lenders.  "The creditor makes large profits on the mahin-khat system, of which the following is an illustration.  Suppose a man wants Rs. 20.  He has to execute a bond for Rs. 25, payable in twenty-five monthly installments of one rupee.  Of the loan, the borrower receives actually only Rs. 17.12, the rest being accounted for as follows :- One rupee for Parvesi or advanced payment, one rupee for dharmavat, apparently a present, and 4 annas for batta or the money-lender's time ; 4 annas for the stamp, 2 annas for the writing fee, 2 annas for the account-book and one anna for the witnesses.  The true rate of interest on the transaction thus works out to about 50 per cent.  In making grain-loans the measurer uses his skill and succeeds in giving out only 19 kuros for 20 kuros, and when receiving takes 21 for 20 kuros. The borrower has also to contribute for the measurer and bigaris of the village.  The debtors are steeped in ignorance.  The majority of them are illiterate and even those who have received education in primary schools have reaped little benefit from it.  I heard of debtors who could be duped into a belief that the month of Phag over, and calling the same period by four different names, i.e., Phag, Phalgun, Simga and Holi."

Legislative control became necessary when money-lenders were found to be indulging in questionable practices.  They took unfair advantage of the illiteracy, ignorance, credulity and helplessness of the ryots to extract money from them.  The Central Banking Inquiry Committee (1931) enlisted the following as some of the mal-practices followed by the money-lenders :-

1. demand for advanced interest ;

2. demand for a present for doing business ;

3. 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 ;

4. insertion in written documents of sums considerably in excess of money actually lent ; and

5. taking of conditional sale-deeds in order to provide against possible evasion of payment by the debtors.

Such practice put a serious drag on the agricultural economy of the district since they robbed the agriculturists of a substantial part of their income.  It was imperative, therefore to regulate the business of money-lenders by appropriate legislative measures.

With this in view the then Government of the Province passed the Central Provinces and Berar Money-Lenders Act, 1934 and made it applicable to Bhandara district along with other district of the Vidarbha Region.  The Act was subsequently supplemented in 1939 and amended in 1949.  The important addition to the provisions of the Act in 1939 was that the Act was deemed to be in force with effect from 1st April 1935.  According to the Amendment Act (1949), the registration certificates granted before 1st April 1949, were to cease from being operative with effect from the date so appointed.  The persons holding such certificate were entitled to refund of the registration fee in such cases.

After the reorganisation of States in 1956 the district of Bhandara formed part of the then Bombay State and subsequently with the bifurcation of that State, of the newly formed State of Maharashtra, with the result that the rules, regulations and enactments which were already in force in the State of Maharashtra were gradually made applicable to Bhandara district along with the other districts in the Vidarbha Region.  The Bombay Money-lender's  Act of 1946 was thus applied to Bhandara district from 1st February 1960.  The important provisions of the Act are :-

1. The State Government was authorised to appoint Registrar General, Registrar, and Assistant Registrar of Money-lenders and to define areas of their duties.

2. Every Registrar was to maintain a register of money-lenders in his jurisdiction.

3. Money-lenders were not to carry on business of money-lending except in the area under licences and except in accordance with the terms of licence.

4. The Registrar, the Assistant Registrar or any other officer was authorised to demand from any money-lender the production of any record or document in his possession which was relevant for his purposes.

5. Every money-lender was to keep and maintain a cash book and a ledger in a prescribed form and manner.

6. Every money-lender was to give a specific 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 to be treated as an offence and was to be penalised.

9. Notwithstanding any law in force, no debtor who cultivated land personally and whose debt did not exceed Rs. 15,000 could 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 the Act came into force.

The Act was subsequently amended.  The important amendments made pertained to the introduction of 4-A and 5-A forms and the "Pass Book" system, provision of calculating interest on Katimiti system and facilities to certain classes of money-lenders permitting them to submit a quarterly statement of loans to be 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 Registrar and the Assistant Registrar 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 the Government were not entirely partial tot he debtors.  The money-lenders also were given relief when the structure of interest rates was revised as from 5th July 1952.  This was done with a view to ensuring a steady supply of credit from money-lenders.  Accordingly, the maximum rates were raised from six per cent to twelve per cent per annum on unsecured loans.  The money-lenders 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.

Since the application of the Money-lender's Act, the money-lenders were required to make application to the Assistant Registrar of Money-lenders in the district for either the grant of licences or for their renewal, as the case may be, before they could carry on any money-lending operations.  Formerly, the money-lending business in the district was controlled by the Assistant Registrar of Money-lenders.  Since March 1961, the Assistant Registrar of Co-operative Societies works as Assistant Registrar of Money-lenders as well.

Although no separate account of money-lenders was maintained during the early years of the present century, the following table gives an idea of the number of money-lenders in the district and credit given by them to traders and non-traders since the implementation of the Money-lenders Act till 1967-68.

TABLE No.1

NUMBER OF MONEY-LENDERS AND CREDIT GIVEN BY THEM TO TRADERS AND NON-TRADERS IN THE DISTRICT.