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Neither a lender nor a borrower be.
It took the death of a famous personality to bring the issue of usury out in the open. For years, thousands of borrowers had been suffering silently under the pressure of lenders who would stop at nothing to recover their principal and interest.
When cinema producer and politician G Venkateswaran (GV) hanged himself to death in Chennai, allegedly due to threats from people who had lent him huge sums, there was a public outcry against usury.
It was then that the media threw words like ‘kandu vaddi’, ‘meter vaddi’ and ‘naal vaddi’, at the public, which did nothing except help grow people’s vocabulary.
But there are many borrowers for whom this has been a part of life.
‘Kandu vaddi’ is the mildest of the three, though it is still usurious.
‘Naal vaddi’ is money borrowed for a specific time-frame of days or months and so the interest goes up steeply.
‘Meter.vaddi’ is the fastest “growing” among the three as it is interest charged by the hour. People in the export business usually go in for this ‘vaddi’ as their turnover is huge and they do not mind the exorbitant interest charged.
GV’s was one case that caught the public eye. There are several cases that are equally pathetic. In one such case, a man had lent Rs 2 lakh but the borrower could not pay the interest for two years. So, he got the borrower’s house, worth Rs 15 lakh, transferred in his name!
In Madurai, an usurious lender gave Rs 5,000 to a businessman and within four months took away furniture worth Rs 25,000 in lieu of payment.
During salary day, one can find these financiers literally snatching away the pay packet from railway workers who have borrowed money from them.
Apart from these tactics, there are those who hold the family of the borrowers captive to get back the principal and interest.
While this is the case of private lenders, there is large-scale coercion going on even in the case of MNC banks. These lenders resort to almost similar tricks: they threaten the borrowers, set goondas on them and seize their movable properties.
Those flashing credit cards actually pay in advance Rs 800 as annual charge for services to be rendered. Then they have to pay Rs 100 as the monthly charges. And then pay the service charge. Rs 300 penalty if they don’t pay the minimum payment due.
Transaction charge for Rs 1,000, is Rs 100. Additional amounts are collected at the rate of 3 per cent monthly interest plus surcharge. Here again, interest is charged on both counts if there is delay.
The interest they charge should also be called usury.
So, the Tamil Nadu Prohibition of Charging Exorbitant Interest Ordinance has not come a day too soon to save the life and property of the borrowers from lenders who would stop at nothing to get the money back – several fold.
But, as the saying goes, a hard case should not make a bad law.
There are thousands of small-time businessmen and people in the entertainment business who are always in need of liquid cash and in huge amounts.
Take the case of the vegetable vendors of Koyambedu, the wholesale vegetable market on the outskirts of Chennai. They depend on these “usurious lenders” to lead a livelihood. With the government acting tough on the lenders and the media blowing up their arrests, not many people are now willing to lend them money.
Yes, the lenders charged an exorbitant interest and made their lives miserable if they did not pay up. But it was a case of ‘ask and you shall be given’ as far as money was concerned. Now, with no alternative left, they are wondering how to carry on their business.
For example, the pavement vegetable vendors would borrow Rs 1,000 for an interest of Rs 50 per day. However, he/she would manage to earn at least Rs 200-250 in a day with the help of that money. The steep daily interest did not worry them.
The government has done well in saving the poor borrowers from these lenders. But it should also ensure that there is another system in place to help people continue to get the money they need and just as easily as it was available from a lender.
Money circulation has been tight in Tamil Nadu for several years now and the new ordinance should not add to the miseries of the people at the bottom of the heap.
Nationalised banks must step in to fill this vacuum and lend money without seeking collateral. Their interest rates have come down and this would encourage the borrowers to return the money without too much of a struggle.
If the banks do not replace the lenders quickly, the borrowers will not even be able to cry out against them but will continue to suffer in silence. As usual, we will have a law that cannot be enforced.
Moreover, when a debtor gives a complaint against this usury financier under the new ordinance, provision should also be made to make liable the borrower pay back at least the principal amount to the financier. Otherwise, this would send a wrong message to the public to take a loan from an usurious financier and lodge a complaint against him and then fraudulently swindle the principal amount.
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