“Families have lost land, farmers have been asked to prostitute their wives to pay off debts …” writes Krittivas Mukherjee / Reuters.
Outdated Bollywood Style
I wonder what is the source of Krittivas’s article. I wonder how many prostitutes these money lenders have - from their 2,00,00,000 farmer-borrowers. Friend Krittivas is reading a lot of colonial era propaganda - and seeing old Bollywood movies. Even Bollywood has stopped this kind of portrayal of money lenders now. TV serials these days have business families as stars of the show.
Which era are you in, Bro Krittivas? Apparently, the ghost of East India Company is alive, well and kicking. Is this the kind of grovelling that has to be done to be a part of Reuters, Krittivas?
A financial newspaper ‘The Mint’ dutifully carries this Reuters article. The Mint published jointly by The Hindustan Times and The Wall Street Journal regularly carries these bloopers. In another article that the Mint carries, writes how Indian “cities began suffering chronic milk shortages soon after independence in 1947″ - implying that colonial India was the land of milk and honey. This kind of editorial blindness nearly makes me believe that the Indian Government got it right with the previous policy of excluding foreign media.
Some Stats About Money Lenders
There are 34,000 money lenders - and they have lent money to more than 2,00,00,000 farmers. They account for nearly 30% of the rural credit flows - and more credit than all the nationalized banks put together. They charge between 18% to 36% p.a. interest generally. Lesser than what most ‘educated’ credit card users pay - and what ‘modern’ banks charge their English speaking customers.
So much about ‘usury’ by money lenders.
The Seths Who Funded The East India Companies
The vilification of the money lender by the British Colonial Raj at various times for political and economic gains has unfortunately been carried forward in post-colonial India. The English East India Company (EEIC) was initially funded and grew on Indian capital. The House Of Jagat Seth was most famous - and one of the largest banking families in the world. Virji Vora, Shantidas were other merchant bankers who funded the various European Indian Charter Companies in their trade. EEIC officials could not forget their supplicant status with these ’seths’ - when they were desperate borrowers.
After 1757, and the occupation of the Bengal, Bihar and Orissa, transactions with the East India Company caused the ruin of many Indian lenders.
The other reason why money lenders were portrayed as villains by the the Colonial administrations was merchandise. Instead of bonded producers of Europe, Indian producers were free to sell their product to the highest bidder. The EEIC found that their contracts could be annulled by repaying the advance amounts. And the weavers and other producers could repay the advances by borrowing from the local money lender.
20th Century Vilification
Later during the Great Depression and the so-called ‘Indian currency crises’, Britain was extracting gold from Indian peasants, to overcome its own problems. For British loot to happen and to make their policies effective, they needed to leave the peasant without options. The only way to do that was to curb the money lender. To achieve this aim, between 1925-1940, enquiry commissions were created - and propaganda ‘reports’ flooded the system.
The colonial India Government passed many of the laws restricting money lending activities. These reports - Central Banking Enquiry Committee (CBEC) report (1929) and its associated Provincial Banking Enquiry Committee reports (of Assam, Bombay, Burma, Ceylon, Central Provinces, Bengal, Punjab, et al) of which the Madras Provincial Banking Enquiry Committee (MPBEC) report is cited by lazy academics and out-moded bureaucrats as authoritative - even in post-colonial era.
April Fool Joke - The RBI
On April 1st, 1934, while the ‘Squeeze India’ campaign was under execution - and being choreographed by Montagu Norman, Neville Chamberlain, Winston Churchill (some sickness … some racism) Lord Willingdon, India’s banking authority was set up. From that April Fool’s day till now, RBI character has not changed. It remains isolated, out of touch with the India - and looks at India through colonial viewing glasses.
The tragedy is that RBI is not alone. The IAS (a successor to the ICS) and the Planning Commission are the other two. Compare that with the brilliant track record of modern Indian regulators and organizations like the SEBI, TRAI.
Legalized Harassment & Extortion
Debt Conciliation Acts were passed between 1933 and 1936 by the governments of Assam, Bengal, Central Provinces and Berar, Madras and Punjab; the Punjab Regulation of Accounts Act (1930) and the Debtors Protection Acts of 1935 and other such burdensome laws buried the money lender in mountains of paperwork and licences. These laws required money lenders to comply with extensive and prolonged compulsory licensing and registration - and extensive recording of transactions and accounts.
What these laws achieved was what was desired - a licence for police and other ‘inspectors’ to start an extortion racket from money lenders (these days called corruption). A bureaucrat from colonial Punjab, Malcolm Darling (1925) shedding crocodile tears stated “the Indian peasant is born in debt, lives in debt and dies in debt” became a by line for tarring the money lender - while the cause was extractive, colonial revenue practices.
Options Foreclosed
These restrictions on money lending foreclosed the liquidity option for the Indian peasant, which would have averted the gold outflow from India and the impoverishment of the Indian peasant. With this legalized persecution, money lenders’ activities were curtailed all over India. RBI joined in this hounding of the money lenders - which continues to this day. Chettiar money lenders were thrown out of Burma. From being a granary of Asia, Burma started declining - and there was no rice for exports. Result - The Bengal Famine of 1943. Tally - 50 lakh deaths.
The RBI, a colonial era body, continues with these colonial anti-Indian policies. They keep ever-greening and recycle colonial policies. Old laws with new labels and different wordings are made - with the same intent. Kill the money lender. While all this was happening, Indian agriculture and the peasant suffers.
Even the rare modern supporter of the money lender does not see the colonial baggage that India and Indians governance carries, sees only half the picture - and little opportunity.
The Pre-WW2 Currency Crisis
After (colonial) India’s accession to the world gold standard in 1898, India rapidly built up a export surplus - and British reserves of gold started drying up - in spite of gold export restrictions to India by the USA, Britain and much of the Western world. There was hysteria in popular press and politicians on the subject of India and its appetite for gold. To overcome this payment crisis, it was decided to pay India in silver released by the Pittman Act. Subsequently, even payments in silver became difficult. India then started getting paid by Bank Of England credit notes.
By WW1 end, it was evident that sooner rather than later, India would obtain dominion status. Between 1920-40, in a series of measures, it was decided to reverse this policy. Central bankers from the USA, Britain, France and Germany had many meetings to “coordinate monetary policy.” The agenda - gold flow management between themselves and an obvious understanding - don’t let the browns get the gold. They (Hjalmar Schacht, Governor, Reichsbank, Charles Rist, Deputy Governor, Banque de France, Benjamin Strong, USA Federal Reserve, Montagu Norman, Bank Of England) agreed that Indian demand for gold had a “…deflationary effect on global liquidity,”” therefore Indian demand for gold had to be regulated.” So, while the West consumed Indian production and goods, they regulated Indian demand for gold!! The result - Bengal Famine of 1943 which killed 40 lakh Indians. As Gideon Polya has pointed out, Australian sheep have lower mortality rates.
Like much of Western history, the British (Lord Willingdon, Neville Chamberlain, Montagu Norman, Winston Churchill - as the Chancellor of the Exchequer) executed a scorched earth policy in India. (After all what is brown life worth?) They implemented a series of economic and administrative measures that killed millions in the Bengal Famine would impoverish India - and sustain the empire.
Montagu Norman, Winston Churchill (then the Chancellor of the Exchequer) returned to the gold standard - with the famous prediction by Keynes that this action would result in a world wide recession - of which much came to pass. Churchill confessed “I’m lost and reduced to groping,” but went along with Montagu Norman, united by their racism.
On October 27th, 1931, the Ramsey Macdonald led “National” Government (Conservatives and Liberals coalition, fearful of the rising Labour Party) in Britain won a huge majority of 554 MPs of 615. The economic crisis of September (misnamed as the Indian Currency Crisis), ensuing Depression era problems in the US, the Weimar Republic problems - and other issues pushed this ‘National’ government to ram through a series of measures (page 130-131) that depressed silver prices, inflated gold prices and raised interest rates in India.
Done over the protests by Gandhiji, trade bodies and merchants and threats of resignation by the Viceroy and his Executive Council , the resulting ‘money famine’ (page 155) had the Lord Willingdon ecstatically say ‘… Indians are disgorging gold … (page 156). Indians have a different reason to revile Neville Chamberlain who with great satisfaction said “…The astonishing gold mine that we have discovered in India’s hordes has put us in clover …”after impoverishment of the Indian serf.
What Can be Done
The largest credit agency system - which knows Indian agriculture like the back of its hand is available to the Indian economy. Trash the colonial propaganda - and use these money lenders.
Step 1 - Stop calling them money lenders. This term was used and has acquired pejorative connotations.
Step 2 - Bring them under SEBI - an effective organization, not reputed for corruption.
Step 3 - Increase credit supply - and interest rates will automatically fall. Allow re-finance to these banias - based on their loan books.
Step 4 - Create credit enhancement tools - by use of traditional adhatiyas, other money lenders, property collateral of the end user, etc.
Step 5 - Induce competition by simplifying registration and inducing initial success for existing and new comers.
These credit experts can become low cost credit delivery mechanisms - which can revolutionize Indian agriculture. Will Indian planners grow out of their colonial molds? Will Indian legislation go native? Sooner the better.
What Can The Money Lenders Do?
Under generations of persecution, extortion and discrimination has blunted the organizational capability of the ‘native money lender.’ He needs to look at himself afresh - and exploit business opportunities and use his knowledge of the Indian financial ‘consumer.’
A simple outline of an action plan for the money lenders to reclaim their position can be as follows: -
1. Incorporate a holding company.
2. Contribute one lakh rupees capital per member - with 34,000 memers.
3. Create a paid up promoter capital of Rs.340 crores - and an IPO for 660 crores.
4. Obtain RBI licence for a rural bank with this paid up capital of 1000 crores.
5. Enrol all money lender members as DSAs.
6. Refinance money lender portfolio - and create further liquidity.
7. Use the money lender network to raise deposits, sell insurance, obtain refinance mortgage for housing, etc.
Even a conservative estimate of Rs.1.00 crore lending, guaranteed by these money lenders can inject Rs.34,000 crores of investment in the agricultural economy in India. SEBI can be co-opted to create appropriate supervisory and oversight measures.
Filmi Stereotypes
Of course, the Western zeal for free trade extends to enforcing opium trade (just ask the Chinese). Kishorebhai, I only wish, as an ignorant Easterner that we in India can enforce ‘free trade’ in opium today in USA and the Europe.
Similarly, if the Gypsies had not left India, (supposedly) a thousand years ago, they would have lost all the benefits of Western civilization.
7.Education
By 2000, India had less than 4 crore phones. Most of the 100 crore (1billion) Indians were unconnected - and disconnected from the world. Governments monopolies, BSNL and MTNL, ruled the roost. Pricing was based on scarcity - rather than any commercial costing or margin strategy.
By 2001, the BJP led Government came to power. The telecom regulator in a series of bold moves, changed policies - and equations. Tariffs declined by nearly 5000% - from roughly 50 cents to 1 cent per minute. User base ballooned to 20 crores - from 4 crores. In 7 years more telecom users were added than in the previous 70 years. For the first time, the poor in India are beginning to benefit from technology.
During WW2, nearly 40% rolling stock from India was 
A cabal of Black conspirators sniffed out Jefferson’s secret - his greatest ideas (listed above) came when he dined alone.What followed was diabolical.To stop further such ideas, they recruited Sally Hemmings on a suicide mission.
.gif)
flooding India with its Manchester & Lancaster wares - and restricted Indian handloom weavers from competing with Manchester & Lancaster.
