Moneylenders may be a cause of recurring nightmares to debt-laden farmers, but the government is now considering bringing this unorganised source of credit disbursal under the regulatory framework so as to tap its reach.
A committee, constituted by the Reserve Bank of India, will soon come out with recommendations on the possibility of regulating moneylenders, central bank sources said.
Constituted in May, the group comprises heads of five departments who deal with financial regulation and supervision and finance secretaries of three states.
Normally, an RBI committee submits its report in three-four months. Finance secretaries of Bihar, Rajasthan and Andhra Pradesh are members of the technical committee, which is looking into various aspects of moneylending and whether it can be brought under one fold through the financial regulation.
Among various options being explored, an idea has emerged to permit moneylenders advance loans to farmers through refinance mechanism -- which would involve a bank first lending to moneylenders, who in turn would disburse it among farmers, depending on their need and use basis.
Moneylenders could be an effective and inexpensive medium of credit disbursal in the hinterland, only if they are registered and interest charged by them is regulated, said an expert.
This would help in curbing the oppressive nature of the business and can be an employment opportunity for some, said the expert, who declined to be named.
Currently, different states have law relating to moneylending but with varied provisions.
RBI in its annual report released in April had made reference in this respect, pointing out that the All India Debt and Investment Survey (NSS Fifty-Ninth Round) has revealed that the share of moneylenders in total dues of rural households has increased from 17.5 per cent in 1991 to 29.6 per cent in 2002.
Considering that high indebtedness to moneylenders can be an important reason for distress of farmers, the RBI had at that time proposed to set up a Technical Group to review the efficacy of the existing legislative framework governing moneylending and its enforcement machinery in different states.
The committee would also make recommendations to state governments for improving the legal and enforcement framework on moneylending in the interest of rural households.
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