Late Extra: Liberalised lending ushers in changes

Liberalised lending, low interest rates may in the long run, ring the death knell for India's infamous traditional extortionist money lender.

If the latter were to come true and banking services are extended to cover the vast rural areas of the country – the last bastion of the money lending community might itself have to reorganise and overhaul its method of operation and also change its image.

In the urban areas the change is evident and at times evokes mixed reactions from the so-called 'haves'. That their privileges are now on offer to the presumed weaker sections of society is something that some applaud but some find it hard to stomach.

I began to examine the phenomenon just about a month ago when the garbage collector rode up to my house on a brand new motorcycle. If that was not enough to tickle my curiosity, it was the fact that he had another man with him riding a tricycle trolley into which the garbage was being collected.

I could not help but ask Sonu if he had got married and had been given the motorcycle in dowry. That was not the case, Sonu assured me. He had taken a loan from a bank. So what collateral did he give? And it was the answer to that question which was a revelation.

Money management

Though Sonu is a marginal literate having studied up to the primary level, his enterprise and money management is amazing. He is a regular employee of the municipal corporation and therefore has an assured regular income.

That is enough to establish his creditworthiness. He first borrowed from the bank to set up a shop selling electrical goods. That meant employing two electricians and with the profit from that enterprise he paid back the loan.

He then borrowed again and set up a grocery. That loan too has been repaid. With three regular sources of income – the municipality, the electrical goods shop and the grocery – Sonu explained it was time that he bought a motorcycle – time management.

Yet he has not given up his traditional occupation of garbage collecting – the fourth source of income.

It is not hard to guess that Sonu belongs to the lowest category in the Indian caste system. And yet he has not just sat back earned the meager sum paid for garbage collecting but ventured forth to establish a success story.

The idea of approaching a bank for a loan believe it or not dawned on him while watching an advertisement on television. The local moneylender had refused to lend him money just on the basis of the municipal salary certificate. The bank was.

To top it all Sonu began explaining to me how because of the low interest rates the equated monthly installment too was low and easier to pay back.

However, not everyone in the 'have not' category in India or from the low-income group is as enterprising as Sonu.

There are millions still living in virtual bondage because they have borrowed from the moneylenders and are unable able to pay back.

If the Indian masses are to progress beyond mere consumerism, the government of India too has realised that the banking sector would have to play a major role. The Indian government is presently gently prodding banks to start operating in the rural areas.

It would be in the interest of the banks if they did so voluntarily and reap the harvest from the vast rural population of India, whether it is the farmer or the labourer.

The writer is an India-based journalist.