Rather curiously this is my first political opinion piece this election season. I guess working on the field is much more satisfying than ranting online.
Anyway, the issue I want to muse today is private lending at abominable interest rates. In Tamil, we call it as 'kandhu vatti'. The practice where a private person lends loans which are typically charged interest every month. For example for 1000 rupees lent, the debtor will have to pay 50 rupees interest per month until he repays the principle.
If the math doesn't strike you in the gut already, thats 60% interest per year!! And in many cases, the creditor will also deduct the interest at the time of lending. Example: For a 1000 rupee loan, the debtor will just get 400 at the time of the transaction. But by the end of the year he has to pay 1000 back. No wonder farmers commit suicide.
Few months ago I discovered that one of my friends happened to be one such debtor. The '50 on 1000 rupees' interest I mentioned above sadly isn't one I made up. Thats what my friend was paying! His family had taken a loan of about 60K for his sister's wedding, they had paid about 40K at the end of the year and still 'owed' their creditors 80K!!
Believe me, this country has several million such debtors whose blood is being sucked by those bastards. Now, how do you solve this problem? Is waiving loan given by public sector and cooperative banks gonna solve this? I seriously doubt if anyone among the thousands of farmers who committed suicide, did so, because he/she owed money to a bank and was embarrassed about not being able to repay.
Anyway, the Congress party went ahead and waived 50K crores of farm credit. Ofcourse you, I and a few million others, paid for that largesse with our tax money. BJP hijacked by such socialists as Sudheendra Kulkarni and Raman Singh also proposes to waive more such loans in its manifesto. Screw the millions of other honest farmers who repaid their loans in time or were plain 'stupid' not to have taken a loan in this period.
Moving on, how will such loan waivers stop the suicides of farmers who got credit from those evil private lenders? The solution is actually straight forward. If those farmers get easy access to bank loans at cheaper rates, they'll perhaps refinance their credit. BJP has proposed Farm loans at max interest rate of 4%. If I waste some time on the Congress manifesto, I might even find a line on "easy kisan credit".
Now which party do you trust to deliver on the promise of easy farm credit? I leave it to you to decide.
Anyway, I would further propose that the incoming govt, start a max interest rate regime across the board. For instance, we may set the max interest rate as twice that of the prime-lending rate. If RBI gives credit at 6%, anyone who gives credit at more than 12% annual interest should automatically land in jail. Simple, no?
ps: 'kabandhu' in Tamil means protection. So a Max Interest rate regime = kabandhu vatti = protection againt atrocious interest rate regime!