It was a harrowing experience

The interest component of unpaid card bills led to my niece reaching out to these people through word of mouth. Apparently, a pan-chewing lady came with the money and took a signature on a blank paper. The money was handed over in a cover with no questions asked. Every month, the interest would be collected and unfortunately, the move of using one loan to settle another backfired, owing to their economic distress. She pledged jewellery to service the debt but that too failed. Thereafter, as she was fatherless, she reached out and we helped her clear all her debts. It was a harrowing experience as borrowing via kandu vatti channel caused extreme panic and pain. When we calculated, the cost of servicing the debt (upwards of Rs 2 lakh) was much beyond the loan amount. In fact, my niece had to lose out on savings kept aside by her father.”

Recalling the days when the late CM Jayalalithaa had banned this mode of transaction, the person expressed surprise that things seemed to have again gone back to square one. It is sad that even those who are literate backgrounds resorting to tap the informal loan segment when the government is making efforts to regulate lending. The Mudra loan is one example. We helped our maid avail this facility and as there were no collaterals or other pledge of assets, it was easy.

Also, after re-monetisation, following the November 8 demonetisation, banks are flush with funds. They should identify individuals seeking need-based loans and allot the money.

RBI guidelines issued vide Master Circular on lending to MSME Sector (para 4.2) dated July 01, 2014, in respect of loans upto Rs 10 lakh says, “banks are mandated not to accept collateral security in the case of loans upto Rs 10 lakh extended to units in the Micro Small Enterprises (MSE) Sector. Banks are required to encourage their branch level functionaries to avail of the Credit Guarantee Scheme cover, wherever felt desirable.”