"A woman commits suicide due to her husband's huge debts."" A business family flees unable to repay debts." "A man deserts his family and has gone missing due to money crisis." "A businessman is absconding to avoid the demanding money lenders."
These and many such disturbing stories are commonly heard in Chintamani these days. Thanks to the number of money lenders, and of-course to the shady borrowers. "Chintamani is a bank of bankers" admits a bank manager.
Money-lenders have always been accused of exploiting the poor by charging too much for loans, but what can - or should - be done about this? No doubt that the money lender's funding gives immediate relief and provides the necessary fuel to run the ailing businesses of the borrowers, but the same fuel will ignite a much bigger problem. The money lending businesses have their own rules or 'no-rules' for trading. The people who take loans pledge assets like gold jewelery or a piece of land they own. But often it's just an oral agreement between the lender & the borrower. The transaction runs to a few thousands to crores of rupees. While the Nationalised Bank's interest rates on business loans are between 12% to 14% per year and 8% to 10% per year on home loans, the bankers demand a whopping 10% to 12% per month and with the compounding interest. The trapped borrower will be able to pay, with great difficulty, only the interest amount for a few months and later he'll find it very hard to pay even the interest amount. The lender will pound him with a compound interest and the dues will become hefty to repay. A person who has borrowed Rs 1 lac will have to pay Rs 10000 every month. In 5 months the lender will pocket half (Rs 50000) the money. The pressure the borrower has to undergo will terribly impact his whole family. Unless the borrowers get money wise there will be no dearth for those tragic stories in Chintamani. These are self inflicted problems. But, can the Government and the RBI find a solution to this knotty problem? Can they regulate the price of the loans? Until than it will be a banker's glory and the borrower's misery. Hope the good principles in the money trading business will prevail, because to Chintamaniacs, the health of Chintamani matters!!
These and many such disturbing stories are commonly heard in Chintamani these days. Thanks to the number of money lenders, and of-course to the shady borrowers. "Chintamani is a bank of bankers" admits a bank manager.
Money-lenders have always been accused of exploiting the poor by charging too much for loans, but what can - or should - be done about this? No doubt that the money lender's funding gives immediate relief and provides the necessary fuel to run the ailing businesses of the borrowers, but the same fuel will ignite a much bigger problem. The money lending businesses have their own rules or 'no-rules' for trading. The people who take loans pledge assets like gold jewelery or a piece of land they own. But often it's just an oral agreement between the lender & the borrower. The transaction runs to a few thousands to crores of rupees. While the Nationalised Bank's interest rates on business loans are between 12% to 14% per year and 8% to 10% per year on home loans, the bankers demand a whopping 10% to 12% per month and with the compounding interest. The trapped borrower will be able to pay, with great difficulty, only the interest amount for a few months and later he'll find it very hard to pay even the interest amount. The lender will pound him with a compound interest and the dues will become hefty to repay. A person who has borrowed Rs 1 lac will have to pay Rs 10000 every month. In 5 months the lender will pocket half (Rs 50000) the money. The pressure the borrower has to undergo will terribly impact his whole family. Unless the borrowers get money wise there will be no dearth for those tragic stories in Chintamani. These are self inflicted problems. But, can the Government and the RBI find a solution to this knotty problem? Can they regulate the price of the loans? Until than it will be a banker's glory and the borrower's misery. Hope the good principles in the money trading business will prevail, because to Chintamaniacs, the health of Chintamani matters!!
