Caught in the jaws of loan sharks

Caught in the jaws of loan sharks

In Gujarat, poor and lower-middle income families who are often turned away by banks approach the hundreds of unregistered private money lenders and soon fall into an unending debt trap. The lenders constantly harass them, issuing threats or seizing their lands, which pushes them to attempt suicide. Mahesh Langa reports on the victims and the police’s efforts in curbing this increasing trend

Mahendra Jani borrowed money from a private lender who has taken away the papers of his flat in Ahmedabad.
| Photo Credit: Vijay Soneji

Trigger warning: The article has references to suicide.

Mahendra Jani (name changed), 53, looks crestfallen when he talks about his small flat located in Akhbarnagar area in Ahmedabad, Gujarat. He may have to sell it by October this year if he is not able to repay the amount he had borrowed from a private money lender in 2022. When he began suffering losses in his business of running a communication agency, Jani borrowed ₹4 lakh at an interest rate of 4-5% per month from the money lender. He has already repaid about ₹5 lakh in various instalments in the last two years, but the lender has now asked him to pay ₹4 lakh more in order to “settle” the account. Meanwhile, Jani has wound up his business and found a salaried job.

The lender, Jani says, has taken the house papers for the flat from him, and set October as the deadline for the payment of ₹4 lakh. “I am going through a harrowing experience,” Jani says. “I made a huge mistake in borrowing from this lender, who I found through a common friend. My life is nearly ruined.”

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On his phone, Jani points to each instalment he repaid from his bank account. “The lender gradually increased the interest rate from 5% to 10%,” he says. Tired of the money lender’s constant harassment, Jani plans to approach the police with a stack of documents.

In Santej industrial zone in Gandhinagar, Rameshchandra Gajjar, 49, runs a small pharmaceutical unit. Gajjar had borrowed ₹2.49 crore from two private lenders, Hardik Mehta and Jalpaben Jani, allegedly at a 4% “extortionate rate”, a term that the police use to describe such cases. In his complaint to the police, Gajjar stated that he repaid the ₹2.49 crore with interest and penalty, yet the lenders had demanded ₹2 crore more.

In the last few years, the Gujarat Police have registered several such cases of harassment, property seizure, exploitation, and even violence by private loan sharks. The police say these lenders have networks everywhere, from villages to cities such as Ahmedabad, Surat, and Rajkot. Often, these lenders are not registered with the State government under the Gujarat Money-Lenders Act, 2011. Police say often, lower and middle-class families turn to these lenders in desperation for treatment of health issues, resurrecting dying businesses, or organising weddings.

Chasing exploitative lenders

In 2021, Hitesh Parmar of Ahmedabad’s Chandkheda locality had borrowed ₹40 lakh for his mother’s cancer treatment from two lenders, Tarun and Krunal Tiwari. He claimed in his complaint to the police that he had repaid the amount with a monthly interest of 10%, yet he was allegedly being harassed to pay ₹1.2 crore more. Parmar even moved into a new house to avoid the lenders, but they found him eventually and used violence to intimidate him. Parmar finally approached the police to file a complaint.

In many cases, what starts as a normal financial transaction between a borrower and a lender (or lenders) often turns into a tragedy, with the lenders seizing property or persisting with threats and demands that often even push the borrowers to attempt suicide.

For instance, Akash Sankhla, 32, who is based in Vastral in Ahmedabad, had borrowed ₹5 lakh from a lender named Vipul Vyas. He needed it as working capital for his business. At the time of borrowing, the lender had clarified neither the tenure of the loan nor the interest rate, Sankhla alleges. A few months later, however, Vyas coolly informed Sankhla that the principal amount had increased to ₹15 lakh and that Sankhla had to pay ₹2.25 lakh per month as interest. Sankhla had repaid the initial ₹5 lakh by January 2024, but Vyas’ torture continued, driving him to attempt suicide. Sankhla underwent treatment for mental harassment, as per the complaint he lodged with the Ahmedabad Police earlier this month.

Since 2023, the Gujarat Police has been carrying out a special drive against such lenders. This year, in a press release, the State government had said that 323 cases had been lodged against 565 individuals until July 31. Of them 343 people, who were involved in charging hefty interests and causing harassment or even resorting to violence, were arrested.

“We have seen many cases of harassment by the lenders. Therefore, at the direction of the Chief Minister, we launched this drive against private lenders to help the victims,” Gujarat’s Junior Home Minister, Harsh Sanghvi, had said in July. The drive entails filing cases against lenders who hound borrowers; ensuring that the properties of borrowers are returned to them if the lenders have usurped them; and helping borrowers get finance or credit from government banks and institutions. On August 23, Sanghvi said that the drive against the “monster lenders” would continue and the police would deal sternly with them.

Police officials admit that there have been many cases of suicide and violence, including rape, by private moneylenders. Many of them operate illegally. The interest amounts they charge far exceed the State-mandated maximum rate of 12% per annum from a borrower who has provided security, and 15% from a borrower who hasn’t. There are often huge penalties on late payments and daily interests that compound.

Mahendra Jani in Ahmedabad, Gujarat.
| Photo Credit:
Vijay Soneji

“A bank charges 10-12% interest annually, while private lenders charge more than 51% a month. We have organised a camp with municipal corporations to facilitate credit to poor and lower middle-class borrowers from government banks and other financial institutions. We are also acting against the loan sharks after filing FIRs against them,” Ahmedabad Police Commissioner, G.S. Malik, had said on July 18.

In Surat too, the police organised several such camps. They returned to the borrowers a dozen houses or flats, four plots, and three cars, which were seized by the lenders. “We will not allow any high-handedness. We have launched a crackdown on lenders who use muscle power against borrowers,” says Surat Police Commissioner, Anupan Singh Gehlot.

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Similarly, in Junagadh, about 320 kilometres from Ahmedabad, the police booked 45 lenders in 37 cases between June 21 and July 31 this year. They found more than 250 blank signed cheques which were taken by the lenders from the borrowers. They also found the registration books of 21 vehicles, which had been seized by the lenders.

Death by harassment

In the midst of the special drive that continued until the end of July, the State’s most-circulated daily, Gujarat Samachar, wrote in a five-column article that these seizures and findings were merely the tip of the iceberg. The newspaper also wrote that 797 people had ended their lives due to harassment and violence by lenders between 2017 and 2023. It provided year-wise figures that it had meticulously compiled from various districts and reported that in the last two years alone, nearly 1.6 lakh people in the State had become victims of extortionate rates charged by private lenders.

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There is no official data on the number of deaths by suicide due to private lenders. However, police officials who The Hindu spoke to in half a dozen districts and cities confirmed that the situation is alarming, especially among the poor. Once families borrow money from loan sharks, they end up being trapped for a long time and sometimes even work as bonded labour for the lenders. Their struggle to repay the money for months and years pushes them to the depths of despair, the police said.

In a strongly worded editorial on July 13, Rajkot’s popular Gujarati evening news portal, Akila, implored the State to instil fear among lenders who have been operating with a sense of impunity. “We noticed that families are being destroyed because of these exorbitant interest rates,” says the editor, Kirit Ganatra.

Ganatra cites the example of Nilesh Hindocha and his friend Bhargavbhai, who run a small milk parlour in Rajkot. Their case was widely reported in local newspapers. The two men had borrowed ₹6.7 lakh in staggered amounts. “Against the principal borrowing of ₹6.7 lakh, both of them had paid back ₹27 lakh. But the lenders were threatening them and demanding more money. One lender even asked Hindocha to sell his kidney and settle the ‘outstanding amount’ of ₹6 lakh,” he says. A police complaint was lodged against four people on July 29 in Rajkot.

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The situation is particularly bad in Surat, an industrial city populated by diamond factories and textile units. “The diamond sector is in bad shape due to various global factors and the textile industry is also not doing well. As a result, workers turn to lenders for their petty needs, who harass them. In Surat, there are 3-4 deaths by suicide every day due to economic distress. Usury is also a factor in pushing such hapless people to take extreme steps,” says Surat-based Manoj Mistry, a local journalist who runs a paper called Gujarat Guardian.

Awareness programmes

Last year, when the first drive against lenders was launched in Surat, the then Police Commissioner, Ajay Tomar, had described the lenders as “blood suckers.” He had launched the drive after realising that the borrowers were afraid to approach the police in such cases.

A banner alerting people people who are victims of debt traps to immediately contact the Ahmedabad Police on their helpline number.
| Photo Credit:
Vijay Soneji

Tomar verified the data of private lenders and investigated how many were registered with the State government. Only registered lenders were eligible to lend money to people at a fixed third term interest rate. Economic distress is forcing people to use the services of private moneylenders to borrow paltry amounts for their immediate needs, say police officials who do not want to be named. They add that obtaining loans from banks is an arduous task for many people. In addition, banks turn down applications on various grounds, forcing people to go to private lenders.

Senior police officials say lenders get borrowers to sign blank cheques and then deposit the cheques when the borrowers don’t yield to their unreasonable demands. “Once the signed cheque is deposited and dishonoured for lack of balance or for any other reason, the lender then initiates criminal proceedings against the borrower for default. This tactic is used to scare the borrowers with police action,” they say.

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On August 20, the Ahmedabad Police organised a loan camp for families in Jamalpur, a minority and lower caste-dominated area in central Ahmedabad. “It is an awareness programme against private lenders, and to promote loans from government banks. The government needs to organise such camps in every locality of the city in order to get the victims released from the clutches of private lenders, who suck their small incomes. I thanked the police team for organising the camp in my area,” says Congress MLA from Jamalpur, Imran Khedawala.

According to Khedawala, due to widespread fear of unregulated private lenders, the victims suffer in silence. The fear of lenders is so strong that those who file complaints often refuse to give any more details than what they have already provided to the police.

Instead, they resort to extreme steps. Anurag Chelana, 45, is battling for life at the Sola Civil Hospital. A small farmer in Ganeshpura village of Patan district in north Gujarat, Chelana had borrowed about ₹2.5 lakh from a local lender in 2016 and had repaid almost double the amount in the next few years.

“Yet, the lender kept demanding more,” alleges Vishnu Desai, Chelana’s younger brother. “A few months ago, he threatened Chelana saying he would have to pay ₹20 lakh or else lose his land and house. Chelana filed a police case against the lender’s family in June this year. Within two days, the lender and others came to his house and beat up everyone, including Chelana’s children. The police did nothing.”

On Thursday morning, a defeated Chelana attempted suicide and was rushed to the Civil Hospital. Doctors say he is critically ill. In a note he left behind for his family, Chelana named Dharmshi Desai and his three sons as the lenders who had tortured him. “Those four monsters have ruined my brother’s life and family,” says Desai. Chelana’s wife has been pleading with journalists to try and get them out of this nightmare.

A weak Chelana says, “My life has been destroyed by Dharamshi and his three sons. I have been suffering for many years. These lenders are simply unrelenting.”

Helpline numbers: If you are in distress, please reach out to these 24×7 helplines: KIRAN 1800-599-0019. You may also call the numbers provided in this link.

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