Non-institutional moneylending at exorbitant interest rates is a complex phenomenon, with different facets in different regions. While the Karnataka government on Friday announced one-time discharge of loans availed from moneylenders through Debt Relief Bill, 2018, implementing this is a tough task given the nature of rural lending.
Across the State, a few thousand moneylenders have registered their businesses, but several lend with no authorisation and at very high rates of interest. The latter may be difficult to control under the law because they work through informal networks and are often local power centres, say experts. If APMC traders are engaged in lending in Kalaburagi, it is the budding and big politicians who are into the moneylending business in Hassan and Mandya districts. In Bengaluru, moneylenders thrive across the scales, charging high rates and driving the poor into perennial indebtedness.
In Hyderabad-Karnataka region, a majority of small farmers approach traders at the local APMC for loans before the onset of monsoon every year. They borrow not just to purchase farm inputs such as seeds and fertilisers, but to meet their other financial requirements such as marriage, health and educational needs in their families, and the interest rates may vary – between 24% and 36%.
Lakshman Gowda, who owns nine acres in Kadagamdoddi village, Raichur district, has been stuck in this vicious circle for the last 25 years. “We take loans from a private lender at a monthly interest of 2%. Ours are rain-fed lands and erratic rainfall and consecutive droughts make it difficult to repay the loans. During drought years, we repay only interest. When we are unable to repay the interest too, the loan and interest is carried forward to the next year,” Mr. Gowda told
on Saturday. At present, he has a private loan of Rs. 3 lakh.
Price Support Scheme
Such commitment also keeps them away from the Price Support Scheme (PSS) announced during price crash. Last year, the Union government’s delayed announcement of Minimum Support Price (MSP) delayed the opening of red-gram procurement centres in Kalaburagi district. When the centres were opened, many small farmers had already sold their crop to the traders-lenders at Rs. 3,800 – Rs. 4,500 a quintal against the MSP of Rs. 6,000 a quintal.
In 2015, amidst a spate of farmer suicides in Hassan and Mandya districts, moneylenders, a majority of them affiliated to political parties, were under the scanner. In Hassan, some were even contesting in the ensuing local bodies elections.
Hundreds of cases were filed in Mandya and documents ranging from cheques, promissory notes, signed blank stamp papers, e-stamp papers, sale agreements and vehicle documents among others were seized.
“In spite of action in 2015, the borrowers have cleared or are clearing debts as the lenders, who are powerful, know ways to recover their money with interest,” a jaggery merchant in Mandya said.
Everyone from those in real estate to vegetable vendors in Bengaluru are dependent on private loans, mostly given by unlicensed lenders. However, if big moneylenders seek documents, small time vendors in K.R. Market offer small ‘hand loans’ to vendors in the morning to purchase their wares, and recover the same by evening at high interest rates after business hours.
“Debt Relief Bill, 2018, which the State government seeks to bring through an ordinance to discharge private loans could bring licensed operators to book with disclosure, but it may be difficult for the government to rein in thousands of moneylenders – small and big – across the State, who charge high rates of interest and at times use violence during the recovery process,” a source in the pawnbroking industry said.
(With inputs from Kumar Buradikatti, M.T. Shivakumar, Sathish G.T. and Sharath S. Srivatsa)
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