IT raids on moneylenders

Mysore Sept. 21. The Income Tax authorities raided several institutions of moneylenders in Mysore and Hunsur from September 16 to 18.

Highly-placed sources told The Hindu that the raids found that they were charging a high rate of interest (48 per cent a year) on loans lent to farmers. The forcible recovery of loans at times of crop failure was reckoned to be a major factor forcing small farmers to commit suicide.

The sources said the authorities seized documents revealing the interest rates and transactions amounting to nearly Rs. 5 crore.

It is said that the raids covered more than 30 moneylenders, and jewellery and other valuables mortgaged by the farmers were seized. It was suspected that at least 5,000 farmers might have availed loans from them, sources added.

The 48 per cent interest rate is in violation of the recent Ordinance banning private financiers from charging more than 18 per cent. The maximum interest rate was reduced from 21 per cent in view of the drought.

Preliminary investigations by the authorities proved that farmers patronise pawnbrokers as it was easy to secure loans from them. Stringent conditions apart from the lengthy documentation process involved in taking loans from nationalised banks, and Government and semi-government financial institutions discouraged small and marginal farmers from approaching them.

However, a few farmers' representatives said the annual interest rate said to be charged by the pawnbrokers was reckoned to be "reasonable'' compared to what was normally levied but not shown on record.

Kurubur Shantakumar of the Kabini Raitha Hita Rakshana Samithi told The Hindu that a majority of the moneylenders charged up to seven per cent interest a month. Long-term loans attracted an interest rate of up to 10 per cent a month. According to Mr. Shantakumar, a farmer has to submit a no-due certificate from all banks in the taluk before he can get a loan from a nationalised bank. This takes a week's time which can be crucial during the sowing season. Even if a farmer raises a loan mortgaging his property or jewellery, he has to remit one per cent of the amount as tax by purchasing a bond paper. The second step entails submitting encumbrance certificate for the past 13 years from the sub-registrar's office, which means more delay, while the certificate issued by the taluk office has to be renewed every year when applying for loan. After all these, the farmer has to provide surety and there is hardly a fellow farmer who is not in need of loan or with means to stand surety. Even if the farmer meets the stipulations, there is no guarantee that the banks will release the money in time.

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