TheWorking of Moneylenders

Those who specialize in lending are known as moneylenders. Farmers, landless agricultural labourers, marginal farmers, rural artisans, and small-time shopkeepers and dealers can all get the short-term financial support they need from them.

They provide loans for consumer requirements, religious rites, social gatherings, and other productive uses like raising cattle, seeds, and fertilizer.Also,if you need more information about moneylenders then ,click here   

They are divided into the following two groups:

 (a) Professionals and

 (b) Non-Professionals.

Those whose main line of work is lending are considered professional moneylenders. The non-professional moneylenders, on the other hand, are people who work in another field but also lend money on the side.

They include landlords, farmers, merchants, traders, wealthy widows, pensioners, lawyers, educators, and anyone else with extra cash. Lenders of money, both professionals and amateurs, can be found in both urban and rural regions. However, this distinction is not entirely accurate because an urban merchant may equally extend credit to a farmer whose goods he purchases.

Moneylenders do the following tasks in their daily operations:

(1) Their primary duty is to make short-term loans. Loans may be provided for consumer goods, to fulfill social and religious duties, or to cover a farmer’s needs for fertilizer, animals, seeds, and other items.

(2) Borrowers typically provide their own personal security as collateral for loans. Loans are frequently given out, albeit they are frequently secured by expensive items in urban regions and by land or crops in rural areas.

They know the borrowers personally since they approach them directly and informally.

(4) The moneylenders typically lend their own money.

(5) The amateur moneylenders favor lending in kind.

(6) Since the moneylenders are personally aware of the creditworthiness of the borrowers, they can choose to be rigorous or flexible when making loans, charging interest, and collecting on them.

(7) They impose exorbitant interest rates.

(8) Moneylenders in rural regions wield considerable clout and employ pressure measures to compel repayment of loans, including taking over cultivators’ land forcibly, alienating castes, applying pressure to panchayats, etc.

(9) In rural areas, moneylenders also engage in some unethical practices, such as manipulating accounts, withholding interest in advance, demanding gifts, getting the borrower to perform free services, demanding donations, taking the borrower’s thumbprint on blank paper, failing to provide receipts for the payment of interest and principal, holding the borrower’s land or house’s deed as collateral, and pressuring the borrower-farmer to sell his produce in advance at a lower price.


As a result of the inadequate institutional financing organisations like commercial banks and cooperative banks, moneylenders play a huge role in rural India.