BANKING, TRADE AND COMMERCE

Introduction

Although the Institutional frame-work of the Economic system is uniform all over the State, there prevails a wide range of diversity in the development of credit institutions amongst the districts. This uneven development of the institutions is the result of a large number of factors, such as, location, the systems of communications, availability of resources and the economic condition of the masses. It is on account of these multifarious conditions that Bhandara and Gondia district reveals the peculiarities of its own financial structure.

The present chapter is divided into two parts viz., (1) Banking and Finance and, (2) Trade and Commerce.  The first part of the chapter attempts to describe the various economic institutions in the field of finance and commerce, such as money-lenders, co-operative banks, joint-stock companies, joint-stock banks, life insurance corporation and other Government agencies extending financial assistance to the people in the district. Among these institutions, the money-lender is the oldest institution which has survived through centuries with little of its pristine pattern.  Even now he holds a paramount influence over the agricultural masses.  The main reason for this is that he is the continuous sources of credit supply to the people in the district, whether as an indigenous banker in the town or as a shop-keeper supplying credit to the village-folk or even as a petty pawn-broker.  Another reason is the disinclination of the people to invest their funds for productive purposes or to deposit them in savings banks.  Most of them prefer hoarding to savings as they  would prefer savings to investment.  This has proved a great obstacle in the economic progress of the district.

The excessive rates of interest charged by the money-lender and the mal-practices he adopted to exact money from the poor proved detrimental to the economic well-being of the people in the past.  It was with a view to put a stop to this evil that the Central Provincial and Berar Money-lenders Act of 1934 was passed and applied to the whole of the district.  This Act subsequently removed the mal-practices of money-lenders and sought to extend protection to the debtors.  Another significant forces that helped to restrain the money-lenders' influence was the growth of modern banking in the district after 1951.  Especially after the establishment of the State Bank of India, the banking received a further stimulus.

The co-operative movement, too, has spread its wings all over the district and has given a new hope to the people for better production, better marketing and above all, better financial returns to its members.  Side by side with the agricultural credit societies, which mostly influence the activities of the rural people, there is also a perceptible growth of many non-agricultural and production societies in this district.  Much however, is still expected of the co-operative movement suffering, as it does, from drawbacks such as improper linking of credit with marketing, poor recovery of loans financed by the societies, and at some places a habitual preference for the money-lender by the agriculturists over their own organisations.

Besides purveying credit to the economy, these institutions also collect the savings of the people in the form of premia and invest them in the interest-yielding securities.  The insurance and the joint-stock companies need in this context a specific mention.  The post-war period found a remarkable progress in case of both these institutions.

The takeover of the insurance business by the State and the legislation enacted by it to reduce the profit margin of the companies thus details the role played by the State in this regard to secure economy, efficiency and excellence of its services.  The State also floats loans and raises the funds required for financing its plans and other Governmental outlays.  It further extends financial and other aid to industry and agriculture by advancing to them loans and subsidies.  This active participation of the State in the economic activities is very well marked especially in the small savings movement.  An account of these manifold activities on the part of the State has been discussed elaborately in this part of the chapter.

The financial set-up in the district has got significant bearings on the pattern of its trade and commercial activities.  With the attainment of Independence, the old set-up of economic institutions underwent a remarkable change.  The growth of banking and other financial institutions and increasing facilities made available to the public, help the movement of goods, and infuses briskness in trade.  Price policies adopted from time to time by the State also affect the market trend and determine ultimately the composition of trade.  The State similarly restricted the private interests and reduced their profit margins.  It also competed successfully with private organisations in catering to the needs of the people in the district and cutting across the chain of middlemen.  Especially in regard to commercial activity, it supplied a fresh incentive to producers through higher economic grains.

But that is not all.  With the passing of the Central Provinces and Berar Agricultural Produce Market Act in 1935 (as amended by Act No. VII of 1937) and the Central Provinces and Berar Cotton Market Act, 1932 (as amended by Acts of 1936 and 1937), many of the agricultural commodities were regulated and conditions governing trade were controlled.  With the establishment of a number of marketing committees, trade was further facilitated throughout the district.  It was not, however, by a negative approach through rules and regulations as by its active participation in the various economic activities that the State's role is gaining importance.  State Trading is an illustration in point.  The establishment of fair price shops to check the rising trend of prices and relaxing the strain of higher cost of living needs special mention in this context .  The growing participation of the State in the economic affairs of the district thus constitutes an important landmark in the history of the various economic and commercial organisations in the district.

Thus the second section of this chapter, viz., Trade and Commerce gives the historical background of trade and the trade routes, and also furnishes details about regulated markets, exports, imports, and trade associations in the district.

BANKING AND 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 :-

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 :-

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.

CO-OPERATIVE MOVEMENT

The Co-operative Moment was started in India as a result of the economic distress caused to the peasants during the latter part of the 19th centuries. The idea of forming a co-operative society to solve the problem of rural indebtedness was first suggested by Fredrick Nicholsom in his report of 1895-97. The Famine Commission of 1901 also stressed the necessity of starting credit societies in India of co-operative basis. A real beginning of the co-operative moment was, however, made when the Co-operative Credit Societies Act of 1904 was passed. The object of this Act was to encourage thrift, self-help and co-operation amongst agriculturists, artisans and persons of limited means. Societies formed under the Act were given legal status and were authorised to raise funds and carry on business in a corporate capacity. They were classified as rural and urban ; rural societies were bound to accept the principle of unlimited liability while urban bodies were given a free choice of limited or unlimited liability. This Act, however, was deficient was many respects. The Act of 1912 was, therefore, passed to fill the lacunae of the earlier Act. It regularised certain practices of doubtful legal validity and made provision for further expansion under proper safeguards. The distinction between rural and urban societies was abolished and a more scientific classification based on the nature of the availability of members, whether limited or unlimited, was adopted, Co-operative societies other than credit societies were allowed to be formed. Registration of unions and federal bodies like central banks was expressly legalised and a number of minor improvements were introduced. The simplicity and the elasticity of the old Act were at the same time preserved and a wide rule-making power was left to provinces to enable them to develop on their lines.

The war and the post-war period witnessed a considerable progress in the number of societies, their resources and their coverage. In particular, there was a vigorous growth of consumers moment when the Government decided to appoint co-operative societies as agent for distribution of food grains that had run in short supply.

The co-operatives played a vital role after Independence. The rise in prices improved the paying capacity of agriculturists. This had a favourable effect on the position of the co-operative societies.

During the Second Five-Year Plan period (1956 to 1961 ) development of co-operative movement was given special emphasis under the guiding principals incorporated in the Rural Credit Survey Report, viz.,- 

TABLE No. 2

CO-OPERATIVE SOCIETIES IN BHANDARA DISTRICT IN 1967-68.

TABLE No. 3

FINANCIAL POSITION OF OTHER INDUSTRIAL CO-OPERATIVE SOCIETIES IN BHANDARA DISTRICT, DURING 1967-68.