BANKING TRADE AND COMMERCE
section i- 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 part of his income practised it by force of habit and custom. However there was no law which regulated the money-lending business.
The account of money-lenders from the old Gazetteer of Sholapur District published in 1884 [Gazetteer of the Bombay Presidency, Sholapur District, Vol. XX, 1884, pp. 241-44 and 249-50.] is given below:—
" Few men live solely by lending. Almost all lenders draw part of their income from trade, from husbandry, or from a profession. Money-lenders are of two kinds, professional and non-professional. The professional again belong to two classes, local and foreign. Among non-professional money-lenders are men of all classes, almost all whose calling has yielded them a little money will lend it at interest. The foreign or immigrant moneylenders are Gujarat Shravaks locally known as Gujars, and Marwar Vanis known as Marwaris. Brahman and Lingayat Vanis form the chief classes of local moneylenders, who have to a very great extent been ousted by the intruding Gujar or Marwari. Besides lending money the Gujars are chiefly cloth-dealers, and the Marwaris deal in grain, groceries, and oil. The Brahman lender is generally a land proprietor, a pensioned Government servant, or a pleader. He is generally found in towns and seldom lends except to the better class of landholders. The Lingayat Vanis arc chiefly iron-mongers and grocers and are seldom moneylenders. Besides these classes, the Maratha or Kunbi moneylender is found in villages and towns; he is a husbandman, and, as a rule, does not lend except to people who belong to his village or with whom he is connected.
Gujars, most of them Shravak Vanis of Gujarat, are said to have settled in the district within the last hundred years. They are now spread over the whole district, and are said to be more than three
times as numerous as the local Hindu moneylenders.......... In
moneymaking, unlike Marwar Vanis, Gujar Vanis do not start from
beggary. The Gujar starts with some small capital which he invests in a miscellaneous petty trader's shop. When he has made a handsome sum by shop-keeping, he calls himself a banker or shahukar, and enters widely on moneylending. The Gujars are reputed to be less hard-hearted and more polite, obliging, and friendly than their Marwar rivals, and in consequence more attractive and popular. In Sholapur and other large towns, they have formed no relations with the cultivating classes, but confine themselves to lending money on mortgage of landed and house property, and as pawn-brokers, on pledges at interest of not more than two per cent a month. The village moneylending Gujar is a cultivators' and villagers' moneylender, keeping a general shop, and supplying the villagers with all they require in the way of advances either of cash or of grain.
Marwaris: Marwaris are said to have appeared in this district about fifty years ago. They usually come from Malwa or Marwar, but instances of their settling in Sholapur from neighbouring districts are not rare. They are perhaps not so widely spread over the district as the Gujars, nor do they show so marked a tendency to assimilate to the people of the country.............. Marwaris are reputed as they grow in wealth and years, to grow fonder of money, harder hearted, and less inclined to show leniency to their debtors. Their thrifty habits they never lose. Of all moneylenders the Marwari has the worst name. He shows neither shame nor pity in his treatment of his debtor. He will press a debtor when pressure means bankruptcy. He shows no feeling. The saying runs that he will attach and sell his debtor's cooking and drinking vessels even when the family are in the midst of a meal.
Town lenders: Other moneylenders whether professional or unprofessional, whether foreign or local, may be divided, though the divisions often overlap, into dwellers in towns and dwellers in villages, and again into those who keep regular accounts and those who keep only rough accounts or none at all, basing all their dealings on bonds or rokhs. Pawnbroking also forms a distinct branch of moneylending, though in practice it is usually combined with one of the other branches. As a rule the town lender who keeps regular accounts, the daybook or kird, the ledger or khatavani, and the rough memorandum book of daily transactions from which the others are written up, does not seek exorbitant interest, deals only with the higher classes, on mortgage of houses or other immovable property, or on pledge in the way of pawnbroking, and keeps aloof from poor husbandmen and other embarrassed borrowers. These houses generally do a large business. The smaller men deal with the poor classes who agree to pay higher interest. They keep no accounts, depend entirely on bonds, or at best keep what are called patani accounts, that is a mere daybook which is allowed to run for yean without a balance being struck. Many non-professional moneylenders come under this head, and in this way the successful tailor or weaver often finds a favourable employment for his savings. The professional lender of this class is usually a Marwari, exacting both a pledge and an exorbitant rate of interest, and looking to making his money not so much by repayment as by his debtor's failure to redeem his pledge which consequently falls to the lender.
Village lenders: The professional village moneylender is usually, unless he is in a very large way of business, also a shop-keeper, dealing in grain, chillies, salt, pepper, oil, clarified butter, and such other petty chandlery as the village requires. His shop is held in the front veranda of his house, which is also his storeroom and is generally the sole difference between his house and those of his neighbours. He is usually a Gujar or Marwari, but sometimes a Lingayat Vani. The non-professional village moneylender is usually a cultivator, a Maratha, probably of the family of the village headman or patil, or a Brahman of the village accountant or kulkarni, and village priest or joshi family. These have a better name for leniency and indulgence towards debtors than professional lenders. Others say that from their cleverness and knowledge of the land, they do a better business than any other lenders in the way of mortgages on land.
Interest: At the present time (1884) according to returns received, in small transactions, where an article is given in pawn, an artisan with fair credit pays yearly interest at rates varying from nine to eighteen per cent, for a well-to-do cultivator the minimum rises to twelve per cent, and for a poor cultivator the rates are not less than twelve to twenty-four per cent. In such transactions, if personal security only is received, the yearly rates are said to vary from twelve to twenty-four per cent for the richer and from eighteen to forty-eight and sometimes even to sixty per cent for the poorer class of borrowers. In large transactions, if movable property is mortgaged, the yearly rates are stated to vary from six to fifteen per cent for richer and from twelve to twenty-four per cent for poorer borrowers. When land is mortgaged, the yearly rates are said to vary from six to thirty-six per cent. These rates form only a part of what the borrower has to pay for his loan. Out of the amount of £ 10 (Rs. 100) entered as principal in the bond, the borrower has to pay
2s. (Re. 1) for the stamped paper on which the bond is written, 6d. (4 annas) for the writing of it, and
6s. (Rs. 3) for registration. Discount for ready money is also deducted sometimes at as high a rate as ten per cent. Besides this, except sometimes when the transaction is to extend over more than three years, interest is charged for at least twenty days of the intercalary month.
From six to nine per cent a year is said to be generally considered
a fair return for money invested in land."
Malpractices of money-lenders: The Indian Central Banking Inquiry Committee (1931) enlisted the following malpractices by the money-lenders:—
(1) demand for advance 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 debtor.
Bombay Money-lenders Act: It was not till 1946 that legislation was
undertaken to register money-lenders and to regulate their transactions. The Bombay Money-lenders Act of 1946 requires the moneylenders to obtain licences to carry on their business, to maintain proper accounts of their transactions in the prescribed form and to submit returns in the prescribed form to Government. Further, it authorises the Government to regulate the rate of interest to be charged. This Act was brought into operation in Sholapur district as in the rest of the State, from 17th November 1947.
The Act was subsequently amended in 1954. The important amendments made were the introduction of the Pass Book system, provision of calculating interest on Katmiti system, and facilities to certain classes of money-lenders permitting them to submit a quarterly statement 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 the following years special measures were adopted for protecting backward class people. The Registrar and Assistant Registrars were instructed to take special care while checking the accounts of moneylenders in respect of their transactions with backward class people.
The regulations enacted by the Government were not entirely partial to the 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 the 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 on 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.
Table No. 1 gives the total number of applications received for grant and renewal of money-lending licences and their disposal during the year 1968-69.
Table No. 1 shows that during the year 1968-69, 59 applications for grant of fresh licences were received, while 381 applications were received for renewal of licences. Of the 381 applications for renewal, 373 were renewed and the remaining 8 were withdrawn. In all 16 applications were filed or withdrawn either for grant or renewal during the year 1968-69 and no application either for grant or renewal was refused. Twenty-one licence-holders, especially from Sholapur city, did not apply for renewal during the year 1968-69.
It is noteworthy that the number of licensed money-lenders increased by 22 over the last year's number, viz., 402.
Table No. 2 shows the amount of loans advanced to traders and non-traders by licensed money-lenders since 1960-61.