Call Money Racket in Andhra Pradesh
On December 12, the Andhra Pradesh police arrested several people associated with a ‘call money’ scheme. Several politicians are associated with the scam and the money-lenders involved in the scandal coerced women borrowers to become call girls to repay the loan amount.
What is ‘call money’ scheme?
Around 15 years back, advertisements appeared in Vijayawada offering easy money. Borrowers are offered with instant loans at his doorstep just by making a phone call. But the loans were charged at exorbitant interest rates ranging from 60% to 200%. Houses, vehicles and other properties are taken as guarantee. Borrowers have to repay the loan in a stipulated period. But the lender can demand return of the money over a call anytime and anywhere.In case of failure on repayment, the borrowers are harassed and forced to register their properties in the name of lenders. In few cases, the women borrowers were forced into flesh trade. Based on a complaint by a women victim, the police have busted the racket.
The lenders involved the scheme are neither registered as non-banking financial institutions nor as money-lenders. They are group of individuals who pooled money to create a corpse and started lending. Many of the money-lenders are linked to local politicians and MLAs who parked their black money with money-lenders. The amount involved in the racket is close to Rs. 700 crores. Andhra Pradesh Chief Minister N Chandrababu Naidu asked the people not to repay the loan. The state government has ordered a judicial inquiry under a retired judge of the high court and announced the setting up of a special court in Vijayawada to try the cases of sexual exploitation and harassment.
The Andhra Pradesh Legislative Assembly also passed Andhra Pradesh Money Lenders Bill, 2015 to regulate the private money lending business in the state. The act prohibits money-lending without a licence and allows the state, from time to time, specify the interest rates to be charged. The accounts of money lenders should be audited at least once in a year.
Not the first time
It is not for the first time that borrowers in the state have faced problems with money-lenders who charge very high interest rates and uses forcible recovery techniques. The state witnessed a micro-finance crisis in 2010 that caused a number of suicides by borrowers due to harassment and coercive loan recovery practices. But the present episode is different from the previous scandals. It is for the first time sexual exploitation is reported by women borrowers. It also showed how money-lending activity used as a channel for laundering of money. Other change is the large scale political involvement. It is also observed that the borrowers are not just small traders and from the poor background. The borrowers include high-net-worth individuals who borrowed crores of rupees and using it for speculative activities or for their working capital needs.
In the wake of the MFI crisis in the state, the statements made by the political leaders received by the borrowers that they are not required to repay the loan. The recovery rates plummeted from 99% to 10%. Loans at risk of default surged to 25.5% in 2011. The activities of MFIs came to standstill position in the state. Bad loans increased and banks stopped lending to MFIs. Even after the MFIs stopped their operations in Andhra Pradesh in 2011, money continued to flow through Self-Help-Groups (SHGs). However as borrowers started defaulting to SHGs, the new generation of money-lenders emerged rapidly. But their market is more visible in urban areas rather than rural areas. Agricultural loans at a subsidised price and distribution of Kisan Credit Card to some extent have been able to save the rural borrowers from the scandal.
