Make banking more pro-poor, end usury menace

Tamil Nadu has the best of laws against usury. (The action or practice of lending money at unreasonably high rates of interest). A special police wing to crackdown those who are involved in the Kandhu vatti business is in place.  Suicides by entire families that are taking place are indicators that for one who wants to live honourably in society, by earning one’s own livelihood with dignity, is a major challenge.  For a brief period, this menace was under control, but now it has been revived with more harassment and cruelty.  

It is a well-known fact that those who work in the organised sector are only a handful and a vast majority is in the unorganised sector. Many men and women are doing small businesses, like selling vegetables, fruits, flowers, tailoring, small eateries (idli shops), fish and day-to-today items that are needed for a family.  These are the ones who are targeted by the lenders of the kandhu vatti.  There are some young people who are interested in starting small businesses, which require a lakh or a little more and they too fall into  kandhu vatti trap.  The interest rate is not even calculated on the day’s basis, it is calculated on an hourly basis.  

The lenders keep the money ready 24x7 and give it to anyone without asking any question. If the interest is not paid at the end of the day, they start harassing  the one who took the loan, as well as the family members.  The Koyambedu market and the Kasimedu fishing hamlet are places where a kandhu vatti person fleeces the sellers.  Let us assume a lady who sells fish takes Rs 1,000 from the lender in the morning; he gives only Rs 900 and keeps Rs 100 as interest for the day.  At the end of the day, she has to repay Rs 1,000 taken in the morning as loan.    In northern Tamil Nadu (Salem, Coimbatore, Tiruppur and other districts) four or five people join together to form finance companies and they lend money to the small businessmen, at an exorbitant interest. 

Money lending has become a lucrative business in Tamil Nadu.  The reason why this is thriving is because, the rotation of money, that Self Help Group (SHG) women had saved among themselves or through the revolving fund they get from banks and other financial institutions, has shrunk in size and operations in recent times.  The cumbersome process that banks adopt to lend money to the SHGs is also a reason for the rise of money lenders who charge kandhu vatti.  If the banking system is made pro-poor and easy for people for doing business to a greater extent, the evil of kandhu vatti could be checked.  Earlier, people in need of money used to approach a pawnbroker and they pledge their gold ornaments or even day- to-day utensils to get money. 

The takers of the loan are supposed to repay  it in the given time, with interest. If they are not able to pay, the jewellery they had pledged will get absorbed or it will come up for auction.  People and their families were not harassed, as it is being done in the case of kandhu vatti.  The community that was involved in the pawnbroker business is diversifying into other businesses and that also may be a reason for the kandhu vatti moneylenders to thrive.  Although laws such as the Tamil Nadu Prohibition of Charging Exorbitant Interest Act 2003 are in place, the implementation of such laws is weak.  As observed by one of the distinguished jurists, Nani Palkhivala,  ‘too many laws and too little justice’.