Royal Commission on Labour in India: Report(1929)||
A debt of even one quarter of a year's wages is a heavy burden, particularly to a man whose income is little more than sufficient for bare necessities. But the burden is aggravated out of all proportion by the rate of interest which has to be paid. A common rate is " one anna in the rupee ", i.e., one anna per month on every rupee borrowed, and this was a rate frequently cited to us in our tours. This is 75 per cent per annum, without allowing for the effect of compound interest. For the man who is only three months' wages in debt, the " anna in the rupee " rate involves a monthly charge of nearly 20 per cent of wages, on account of interest, apart from the usual obligation of repaying instalments of the capital. Lower rates are frequent, particularly on loans with security, but they are often associated with stringent conditions as TO the repayment of the instalments. Much higher rates are also charged, 150 per cent or more per annum being by no means uncommon. Frequently the nominal rate is not the real one. For example, money may be borrowed with an addition to the debt of 25 per cent for the year's interest, on an agreement that capital and interest will be paid off in twelve equal monthly instalments during the year; here the actual rate of interest is nearly double the apparent rate. We add a few illustrations of these from various sources. The Bombay Labour Office, in its report on working class budgets in Ahmedabad, observes " The Ahmedabad worker is heavily indebted. The amount of debt varies from a few rupees to many times the monthly income. The money is borrowed at heavy rates of interest which in the majority of cases vary from 12 to 24 per cent. But higher rates of interest are not uncommon, and in fact in one case the rate of interest reported was as high as 225 per cent." The prevailing rates of 12 to 24 per cent are low by comparison with other places, and may, we think, be attributed to the fact that a large proportion of the workers reside permanently in Ahmedabad or the adjacent areas. The enquiry made for us into the standard of living in certain towns of the Central Provinces states " Rates of interest on debts show that 25 per cent per annum is the most usual rate charged, and by far the largest amount of loans is incurred at that rate. But interest as high as 150 per cent, i.e., two annas per rupee per month is not unknown and is generally exacted by the Kabuli money-lenders. The commonest term of such loan is the sawai system (i.e., with 25 per cent interest) which requires that 11/4 times the money borrowed should be repaid within one year, and if it is not repaid within the stipulated time, compound interest is charged." As already observed, the system last described involves the payment of interest at a rate much larger than the apparent one. The Bombay Working Class Budgets Enquiry of 1921-23 gave the usual rate of interest as one anna in the rupee per mensem; a recent enquiry which was much more limited in scope states " While in a few cases no interest had to be paid on the money borrowed, at least in one case the rate of interest was as high as 150 per cent. In 29 per cent of the cases the rate of interest varied from 72 to 78 per cent and in 19 per cent of the cases it varied from 24 to 30 per cent." This relates to families; of 49 single persons in debt, the report observes, " The most usual rate of interest is from 18 to 30 per cent, although in 14 cases it was as high as 75 per cent." The enquiries made for us into the standard of living in the United Provinces give 75 per cent as the commonest rate at Cawnpore, the next commonest rate being 371/2 per cent. In Lucknow and Gorakhpur, the higher rate is exceptional; this appears to be due in part to a number of the workers being members of co-operative societies. The enquiry made for us into the standard of living of jute mill workers in Bengal gives the average rate of interest at 78 per cent. The report on this enquiry and the evidence given to the Bengal Banking Enquiry Committee by the Indian Jute Mills Association both mention as the highest rate 325 per cent annually (one anna in the rupee weekly) on small sums. Rates in the Punjab appear to be much lower, but particulars are not available to distinguish loans by money-lenders from loans by co-operative societies, and here, as in other places, low rates seem to be associated with repayment by monthly instalments. The enquiry made into the standard of living on the South Indian Railway states " More than 80 per cent of the loans are obtained from money-lenders whose usual rate of interest ranges from one anna in the rupee or 75 per cent to two annas in the rupee or 150 per cent."