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Put an end to usurious moneylending

For decades, Karnataka has been facing the menace of unscrupulous money lenders who advance loans at exorbitant interest rates, often driving borrowers to extreme despair and suicide as they are unable to repay the accumulated amount. This exploitative practice is commonly called ‘chakra baddi’ or ‘meter baddi’. But successive governments have failed to do much about it, though the issue has been raised in the legislature on several occasions over the years. The issue echoed again during the ongoing winter session at Belagavi, with the Congress member from Sira, T B Jayachandra, drawing the government’s attention to the increasing number of suicides, as borrowers are unable to withstand the harassment by lenders. Under the system, if one borrows from Rs 1,000, he is required to pay an interest of Rs 100 or more every month. On default, he would have to pay a 10% interest on Rs 1,100 from the next month. Another default means 10% on Rs 1,200, and so on. Home Minister G Parameshwara in his reply not only admitted to the prevalence of the practice but also added that another form of ‘meter baddi’, where a borrower had to pay interest on daily or even hourly basis, also existed. For instance, in K R Market in Bengaluru, flower vendors had to return money borrowed in the morning with 10% interest at the end of the day.

The Karnataka Prohibition on Charging Exorbitant Interest Act, 2004, makes it a punishable offence to lend money at usurious rates of interest. As per the Act, ‘exorbitant interest’ includes charging of interest on hourly, daily, monthly basis or in any other form which works out to be more than the interest rate fixed by the state government under Section 28 of the Karnataka Money Lenders Act, 1961. In case of contravention, the Act provides for an imprisonment of up to three years and a fine of up to Rs 30,000.

Parameshwara said the Act should be made more stringent to be effective. But the problem lies not in the Act per se, but in its poor implementation. According to the data presented by the minister, the government had registered only 97 cases against offenders in the last three years. It is no secret that most of these moneylenders have close links with powerful entities and often enjoy the support of the jurisdictional police, without whose patronage they cannot flourish. In 2018, the then Kumaraswamy government had announced a scheme ‘Badavara Bandhu’ to advance micro-loans to roadside vendors to make Karnataka free of the ‘meter baddi’ business, but not much seems to have come of it. The Home Minister should direct the police to strictly implement the Act and crackdown on exploitative moneylenders.

(Published 13 December 2023, 21:50 IST)

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