Caught in a debt trap

Deepa H.Ramakrishnan and Vidya Venkat

CHENNAI: S. Murali, an autorickshaw driver in Adyar, ended up paying Rs. 80,000 as interest towards his autorickshaw, which cost him Rs. 1, 30,000. The reason? His financier charged compounded rates of interest. Every time he missed payment, the financer doubled the interest the subsequent month.

A number of autorickshaw drivers in the city are caught in a debt trap by private financiers. Most autorickshaw drivers are turned away by banks when they approach them for loans .

Mahendran (name changed), an autorickshaw driver, had applied for a loan in a nationalised bank on the advice of officials at the TAHDCO. But he was denied a loan. “TAHDCO only gives subsidy component for autorickshaw drivers. The bank denied me a loan as they were not satisfied with my answers in the interview,” he said.

“Though I have a degree and have registered with the employment exchange, I am unable to get a loan to buy a vehicle,” lamented S.Thangaraj, a autorickshaw driver at Triplicane.

“Financiers make a killing by selling the permit for a premium at Rs. 93,000 to Rs. 1, 00,000 in the open market,” said a driver, who purchased an autorickshaw and is presently paying dues.

Transport Commissioner C.P. Singh said the government was trying to address the issue of financial inclusion of autorickshaw drivers. The Rs.25, 000 subsidy scheme of the government, which helped drivers obtain a permit in their name and the linking of this subsidy to a loan from nationalised banks helped drivers greatly, he said.

These steps are a market-intervention mechanism in that the rate of permits sold in the open market came down by 40 per cent, Mr. Singh said.

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