Drive against loan sharks revived

The State government has revived Operation Kubera, the drive against loan sharks, as illegal moneylenders drive thousands of families into the debt abyss against the backdrop of a shrinking rural economy, marked by the fall in prices of rubber, and the formal banking sector’s failure to meet the last-mile credit needs of the common man.

Operation Kubera was launched last year as a number of borrowers, harassed and humiliated by the goons of moneylenders, ended their lives and criminal gangs specialising in ‘credit recovery’ flourished. The decline of rubber prices over the past two years has widened the reach of the loan sharks across the State, especially in the countryside and the semi-urban centres. Initially, the police raided the houses and offices of several illegal moneylenders, but the initiative lost steam midway.

Last week’s suicide by a pensioner who had been threatened by a loan gang, and the arrest this week of two women moneylenders have prompted the police to relaunch the operation. The drive will target usurers, illegal lenders, kuries, chit funds, informal financial enterprises and unauthorised non-banking financial institutions, which are collectively dubbed the ‘blade mafia.’

‘Mobile loan mafia’ Until a few years back, the illegal money-lending scene had been dominated by ‘blade companies’ (so called because of their high interest rates) which mainly lent money against gold jewellery or landed property. But, in the past few years, several other players entered the scene, mainly the ‘mobile loan mafia’ most of whom lend to small-time borrowers in the villages and semi-urban centres.

The ‘mobile’ comes from the mobile phones and the motorbikes the lenders use. You make a call to the lender’s mobile phone and in a couple of hours he arrives at your doorstep with the money. A large number of the mobile loan givers are Tamils roaming the villages. The loan period is short – usually three months; and, the interest is high and is deducted in advance from the principal.

“If you don’t repay on time, the Annaachi (Tamil moneylender) sends his ‘recovery gang’ to threaten, harass and finally to assault you,” a victim of the mobile mafia in Malappuram district told Business Line .

Illegal money-lending has flourished mainly because of the formal banking sector’s reluctance to lend to small borrowers. Also, the guarantee requirement, extensive paperwork and delay make bank credit often inaccessible to the small borrowers.

While the banking sector mops up huge sums of money as deposits from Kerala, particularly from the non-resident Keralites (NRKs), the advances by the banks are very low.

In the last financial year, the bank deposits by NRKs crossed the trillion-rupee mark. Chief Minister Oommen Chandy, at a State-level bankers meeting on Monday, came down heavily on the banks for their reluctance to lend within Kerala.

The decline in natural rubber prices has wrecked the rural economy across Kerala over the past two years. This, coupled with increasing consumerism, has increased the need for rural credit. It is into this space that the illegal moneylenders have moved in.

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