Usury is not a new phenomenon in Tamil Nadu. A 10th century stone inscription speaks of Polisai, a form of interest paid in cash and kind. The system is still in vogue in and around Korkai in Tuticorin district, says a senior archaeologist.
According to historians, Nattukottai Nagarathars, who belonged to Chettinad, had adopted a form of usury, known as kandhu kisti or thandal, during British rule. Several pieces of legislation, including the Usury Laws Repeal Act, 1855, the Usurious Loans Act, 1918, and the Tamil Nadu Pawn Brokers Act, 1943, were enacted then.
In the post-Independence era, too, laws were brought forth to contain usury. Most important among them are the Tamil Nadu Money Lenders Act, 1957, and the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003.
The Tamil Nadu Moneylenders Act lays down that no person can carry on the business without a licence and that moneylenders should exhibit their names in front of their shops. Section 7 of the Act states: No moneylender shall charge interest on any loan, at a rate exceeding such rate as the government may, by notification, fix from time to time.
Moneylenders should maintain records such as account books and receipts. Section 10-A of the Act states: No moneylender, whether licensed or not, shall take from a debtor or an intending borrower any note, promise to pay, acknowledgement, power of attorney, bond, security or other document which does not state the actual amount of the loan, the rate of interest charged and the time, if any, within which the principal is stipulated to be repaid in full, or which states any of such particulars incorrectly, nor shall he take from any debtor or an intending borrower any document in which any entry is left blank for completion at a later date.
Section 13 of the Act states categorically that whoever molests or abets the molestation of any debtor for the recovery of any loan shall be punished with imprisonment for a term not exceeding six months but not less than three months. Provided that the court may, in addition to such imprisonment, impose fine which may extend to one thousand rupees, it says. The Act also specifies the punishment for various violations by moneylenders.
Through a G.O. issued on July 6, 1979, the government fixed rates of interest chargeable by moneylenders in respect of loans under the Tamil Nadu Moneylenders Act. For instance, for a secured loan, the simple interest should not exceed 9 per cent per annum and for an unsecured loan it should not exceed 12 per cent.
The Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003, enacted in the wake of film producer G. Venkateswaran committing suicide allegedly owing to usury harassment, also says in Section 4 that whoever charges exorbitant interest on any loan advanced by him or molests or abets the molestation of any debtor for recovery of any loan shall be punishable with imprisonment for a term which may extend to three years and also with fine which may extend to thirty thousand rupees.
Section 9 of the same Act makes it amply clear that where a debtor or any member of his family commits suicide, and if it is shown that immediately prior to the suicide, the debtor or any member of his family was subjected to molestation by any person, the person who has advanced loan shall, unless the contrary is proved, be deemed to have abetted the commission of such suicide.
But usurers show scant regard for these laws. Interactions with functionaries of political parties, non-governmental organisations, trade unions, womens associations, human rights activists and borrowers reveal that different forms of usury still prevail widely in the State.
The most prevalent among the types of usurious lending are kandhu vatti, run vatti, meter vatti, thandal, Sonakku vatti and vaara thavanai. In most of these categories, 20 per cent of the loan amount is deducted at the time of disbursement. The loan amount ranges from Rs.100 to Rs.100 crore.
Under run vatti, the minimum loan amount is Rs.10,000 and the borrower has to pay interest at the rate of Rs.100 a day for the principal of Rs.9,000 as Rs.1,000 is deducted towards the interest payable for the first 10 days. Under meter vatti, the usurer demands Rs.1,100 from the borrower in the evening for Rs.1,000 disbursed in the morning. If the borrower fails to pay the amount the same day, he has to pay Rs.1,200 the next day. Unlike these two categories, kandhu vatti is meant for long-term loans where default in repayment results in high penalty charges. Normally the interest rates range from 60 per cent to 200 per cent.S. Dorairaj