Moneylenders - Full Details (IBPS PO & SBI PO Exam Oriented)
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Moneylenders are those persons whose primary business is money lending.
They lend money from their own funds. Broadly, the moneylenders may be classified into two categories:
(a) the professional moneylenders, and
(b) the non-professional moneylenders.
Professional moneylenders are those persons whose business is only lending of money. The Maharajas, Sahukars and Banias are professional moneylenders. They usually hold licenses for money lending. Non-professional money lenders are those persons who combine money lending with other activities. They do not depend entirely on money lending business. They are mainly engaged in other types of activities. They consist of landlords, agriculturists, traders, pensioners, rich windows etc. They have no license to carry on money lending business. They give loans to known people within their circle.
Features of Moneylenders
The methods and areas of operations vary from moneylender to moneylender. However, there are certain common features of their activities. They are as follows:
(a) Moneylenders mostly lend their own funds.
(b) The borrowers from moneylenders are mainly illiterate and economically weaker sections of the society.
(c) The loans of the moneylenders are highly exploitative in nature.
(d) The credit provided by moneylenders may be secured or unsecured.
(e) The lending operations of moneylenders are prompt, informal and flexible.
Differences Between Money lenders and Indigenous Bankers.
The following are the important differences between the moneylenders and the indigenous
1.The primary business of the moneylenders is money lending. But the primary business of indigenous bankers is not banking.
2.The moneylenders do not accept deposits from the people. But indigenous bankers accept deposits from the people.
3.The indigenous bankers deal in hundies. But moneylenders do not deal in hundies.
4.The indigenous bankers generally lend for trade or productive purposes. But the moneylenders lend for consumption purposes.
5.Moneylenders operate in a limited area. So the scope of their business is limited. But indigenous bankers have a wider area of operation. So they have a large scale financial operations.
6.The indigenous bankers are largely urban-based, where as money-lenders carry on their business in rural areas.
7.Moneylenders functions in an isolated manner. Generally, they do not have any link with the organized sector of the money market. But indigenous bankers maintain some link with the organised sector because of their hundies business.
Defects of Moneylenders
The working of moneylenders has the following defects:
1.The moneylenders have inadequate resources to meet the needs of the rural people.
2.The loans of moneylenders are exploitative in character. They charge very high interest rates. They adopt all types of malpractices in their business. Some of the malpractices are:
(a) demanding interest in advance,
(b) demanding gifts,
(c) manipulating accounts etc.
3. The loans are mostly provided for consumption and unproductive purposes.
4. The moneylenders give loans against standing crops. In this way, they compel the cultivators to sell their produce at low prices to them.
5. Moneylenders have no uniformity in the matter of rate of interest. Different rates of interest are charged in different parts of the country.
The Government has taken various legislative steps to regulate the activities of moneylenders. There are acts like the Deccan Agriculturist Relief Act and the Moneylenders Act passed by the various states in India.
With the growth of rural banks, co-operative societies and other financial agencies in the rural areas, the importance of moneylenders has considerably declined. In near future, they will at the most, play a marginal role in the matter of rural finance in our country.