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‘Loan sharks’ are a necessary evil for poor Indians. They exploit people, but not before they help the latter in need. These money lenders – most of them unregistered – help people in times of instant financial emergency. You get the money within no time. No papers needed! Why on earth they would not charge astronomical rates of interest? They will. It is their business and a businessman always tries to make most of his capital, in this case raw cash. For him it does not matter if the debtor is in dire straits and getting poorer under the burden of interest being paid to the former.

The issue of loan shark hit headlines in Meghalaya recently following the suicide of a woman. The woman, a single mother of four children, allegedly committed suicide after coming under constant pressure from her creditor to repay the money. According to friends and relatives of the woman, who used to sell vegetables, she had been paying around 20% per month interest for a loan of around Rs 50,000.  Her story had led several such other ‘victims’ to come out in the open and lodge FIRs against two other loan sharks. They alleged that they were constantly harassed by the creditors, in some cases even after paying double the principal amount! It is very usual for these money lenders to charge between 10% to 30%, and even 50% for short-term loans, due to poor reach of banking institutions. Narendra Modi’s much-publicised Jan Dhan Yojana has not helped improve the situation either.

What the poor and illiterate people need from banks is credit and not an account to deposit money. Millions of Indians live hand to mouth and you cannot ask them to skip a meal to deposit money in the bank! For the bank, even after 100% success of the Jan Dhan Yojana, the rules for providing loans are the same. The bank, in most cases, asks for a guarantee to give credit. Then there is the trouble of paper work. In such scenario, loan sharks become messiah for the poor and illiterate people, who end up getting one ‘loan’ to repay another, sometimes taken from the same lender! The vicious cycle goes on! There is hardly any quick fix answer, unless the income level of these people goes up and they become educated enough to avail bank loans with less hurdles.

(Published as editorial in The Meghalaya Guardian on May 9, 2015)