Non Institutional Credit Agencies – Introduction

The Non-Institutional Credit Agencies are withal playing a pregnant role inwards our fiscal system. The private moneylenders together with indigenous bankers are the 2 of import constituents of the non-institutional credit agencies. The private coin lenders refers to those individuals who lend credit to the people who require it. Where equally the indigenous bankers refers to those bankers who non exclusively bargain inwards “HUNDIS’ but equally good lend coin together with or convey deposits from the public. Despite the dominant presence of diverse ‘institutional credit agencies’ the private coin lenders together with indigenous lenders are playing their due role inwards our fiscal system. Hence, in that place is a ask to empathize these 2 non-institutional credit agencies.

Features, Operations of Money Lenders

Money lenders are those whose delineate of piece of work concern is to lend coin for interest. Money lenders create non found i homogenous category. Broadly they are of 2 types.

  1. Professional coin lenders whose primary activeness is coin lending.
  2. Non-professional coin lenders whose primary beginning of income is non coin lending. Professional coin lenders mostly concord licenses for coin lending. In Republic of Republic of India in that place are specific communities which cause got traditionally been associated amongst coin lending. Banians, Vysyas, Mahajans, Shahukars, Seths, Chettiars cause got generation later on generation been involved amongst professional person coin lending business. The primary beginning of income of non-professional moneylenders is trading or farming. They include landlords, large farmers, merchants, goldsmiths, jobbers, contractors etc.
Money lenders are a heterogeneous group. However nosotros may position about mutual features together with types of operations they undertake. They are :
  1. Money lenders cause got flexible lending policies. Terms of lending are negotiated betwixt the parties.
  2. Interest on loans is a major beginning of income for the coin lenders, together with for many it is a beginning of livelihood.
  3. They sanction loans to customers against personal safety for personal consumption. Thus, loans may hold upward sanctioned for unproductive purposes also.
  4. Operations of moneylenders are real informal together with create non involve complicated procedures together with rules. They are prompt together with flexible.
  5. Moneylenders rely mostly on the data they collect most the borrower, for determination making purpose. 
  6. Source of finance for moneylenders is mostly their ain funds. 
  7. They keep social contracts amongst their clients, which helps them exercise social command over borrowers piece recovering the loans. Social command may convey the bird of caste disapproval, social boycotting, pressure level from local regime or authorities. This minimizes the chances of default. 

Defects of Moneylenders 

Money lenders resort to diverse undesirable, unethical together with repressive practices, which has made them real unpopular. they are :
  1. Charging exorbitant rates of interest, deducting involvement charged inwards advance which is disadvantageous to the borrower, deceiving the innocent, illiterate borrower through manipulation of accounts.
  2. Where the borrower commits default, the coin lender does non hesitate to exact gratis service from him, which amount to bonded labour. Loans are disbursed inwards installments. The real utilisation of borrowing may hold upward defecated, equally a consequence. 
  3. Demanding gifts together with donations, which may add together to the debt burden of the poor.
  4. Confiscating land, household or other belongings belonging to the borrower inwards village of the debt.
  5. Money lenders frequently create non utilisation the legal methods for recovery of loans inwards illustration of default. They may resort to violence, defaming the borrower together with other undesirable methods to have their loan. 
That’s all for directly friends. In our side past times side transportation service nosotros shall speak over most the characteristics together with operations of Indigenous Bankers inwards detail. Happy Reading 🙂

 Read complete Banking Awareness written report cloth for RBI Grade B Exam from here

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