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When you pay a 40 per cent daily interest

Even by money-lending standards, this was a bit much

What do you do when you are poor, your child is suddenly hospitalised and you have no money to pay the bill? Most likely you'll be forced to depend on your local moneylender. If the latter charges a reasonable rate of interest, you might survive without being scalded much. But more often than not, it is a debt trap that awaits you.

Recently, the city police arrested some moneylenders on the charge of humiliating, harassing, intimidating and collecting extortionate interest rates from their borrowers. In local parlance, this kind of interest rate is sardonically called meter baddi.

The legal interest for secured loans is 15 per cent a year and 18 per cent for unsecured loans. However, local financiers charge up to an unbelievable 20 to 40 per cent interest per day! When the borrowers default, they use muscle power to recover the dues.

Usual victims

Their hapless clientele typically are flower and vegetable shop owners, footpath vendors and autorickshaw drivers, who have no dependable collateral to approach banks. They soon find themselves caught in the quicksand of debt.

With cases of suicide abetment, kidnapping, intimidation and physical attack being reported against moneylenders, the Bangalore City police recently arrested a few, the last after an autorickshaw driver attempted suicide.

Police action

In some cases, the police have confiscated the financiers' properties. “We have also frozen their bank accounts,” a Central Crime Branch (CCB) officer told The Hindu.

He said the 40 per cent daily interest was prevalent in K.R. Market.

“But no one was filing complaints against these meter baddi operators. It is only in the last two weeks that harassed people are approaching us,” he said.

During the last fortnight, the police arrested three notorious ‘meter baddi' operators and recovered 200 blank cheques, blank sheets with borrowers' signatures, documents such as promissory notes, original property records, gold and silver jewellery.

Against rules

Charging such high rate of interest is an offence under the Karnataka Moneylenders' Act 1961, Karnataka Money Lenders Rules 1965, Karnataka Pawn Brokers Act 1961, Karnataka Pawn Brokers Rules 1966, Karnataka Prohibition of Charging of Exorbitant Interest Act 2004 and The Prize Chits and Money Circulation scheme (Banning) Act 1978.

M.T. SHIVA KUMAR

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