As per figures mentioned in the Economic Survey of Maharashtra 2021-22, the loan amount disbursed by licensed private money lenders in Maharashtra increased by 42% in 2021.
The finding comes in the wake of the suicide of nine members of a family at Mhaisal in Sangli district owing to pressure to repay both principal and interest to a private money lender from whom they had taken a loan. It just shows how small households, farmers and landless agricultural labourers are entirely dependent upon private money lenders as the banking network is often unable to finance them.
The survey further states that in 2020, over 623,418 people availed loans worth ₹1,235.38 crore from licensed private money lenders in Maharashtra whereas in 2021, over 788,706 people availed loans worth ₹1,755.25 crore from licensed money lenders in the state. At the same time, the number of licensed money lenders in the state decreased from 12,993 in 2020 to 12,001 in 2021, according to the survey. The number of licensed money lenders decreased because the government did not renew the licenses of many lenders considering various criminal cases lodged against them in connection with money lending. In addition to various credit societies, the state government also allows licensed money lenders to provide loans to individuals. For this purpose, licenses are issued to these lenders by the office of the commissioner for cooperation.
According to experts, small households and marginal farmers did not opt for a loan from the banking system though they needed one because they had no collateral security aka safeguards in the absence of which banks are not allowed to give loans. Another reason why people did not procure loans from the formal sector is that they did not have the necessary documents to submit. A third reason for not approaching the formal system is that they wanted quick disbursal. Due to all these reasons, small households, marginal farmers and labourers opted to borrow money from private money lenders instead though the interest rates are high.
{{/usCountry}}According to experts, small households and marginal farmers did not opt for a loan from the banking system though they needed one because they had no collateral security aka safeguards in the absence of which banks are not allowed to give loans. Another reason why people did not procure loans from the formal sector is that they did not have the necessary documents to submit. A third reason for not approaching the formal system is that they wanted quick disbursal. Due to all these reasons, small households, marginal farmers and labourers opted to borrow money from private money lenders instead though the interest rates are high.
{{/usCountry}}Raghunath Dada Patil, farmer-leader and commentator on private money lending, said that our banking policy is not inclusive and many small and marginal farmers are left out of the banking system. “We don’t have an inclusive financial system to provide finance to poor people. Our banks are not ready to lend to poor and small people because they don’t have stable and constant income to repay the loans. Then where should they go to borrow money?” Patil questioned. He suggested that there is need for a more inclusive banking system to address this problem.
Patil further said that licensed private money lenders are merely the tip of the iceberg as there are a large number of illegal private money lenders tightening the noose around Maharashtra’s poor farmers’ necks.