GRANT OF LOANS AND ADVANCES TO AGRICULTURISTS. 89 



Act; and it will be convenient to consider land improvement loans 

 chiefly in connection with the construction of wells, though it should 

 be understood that the principles enunciated also apply, so far as may 

 be, to tanks, water-courses, embankments and other works for the 

 improvement of land. 



3. As regards the rate of interest to be charged on ordinary 

 advances under the Land Improvement Loans Act, the present practice 

 is that, in Madras, Bombay and Burma the rate levied is 5 percent., and 

 that in all other Provinces it is 6J per cent. Both the Famine Com- 

 mission and the Irrigation Commission suggested that the rate might 

 with advantage be made 5 per cent, in all Provinces, though the 

 latter Commission admitted that a rate of 6J per cent, is not in 

 itself excesssive, and that the people regard it as extremely liberal. 

 The general opinion of the Local Governments of Northern India, 

 however, is that there is no good reason for reducing the present 

 rate of 6j per cent.; and with this opinion the Governor General 

 in Council concurs. This rate is very much less than that warranted 

 by the custom of the country and charged by village money-lenders, 

 and it does not seem probable that a reduction of the rate of interest 

 from 6j to 5 per cent, would have any appreciable effect in increasing 

 the demand for loans, as the ordinary borrower would not be likely 

 to have any clear idea of the benefit he would derive from the 

 reduction. The Governor General in Council agrees with the Irriga- 

 tion Commission that loans under the Land Improvement and 

 Agriculturists' Loans Acts need not be made a source of direct profit 

 to the State ; and he considers that where the present rate of interest 

 is found to result, after taking into account all classes of transactions 

 (including remissions) under both Acts, in a net profit to the 

 Local Government, this margin of profit should be utilised, -not in 

 giving a reduction in the general rate of interest charged to all 

 borrowers, but in granting special concessions to those borrowers 

 who stand in need of them, and thus rendering the system 

 more elastic. He would regard the margin between the rate 

 paid by Government on the loans it raises, and that charged by 

 Government on the advances made to agriculturists, as an assurance 

 * fund against risks and a sinking fund to cover losses, such as may 

 be expected to occur in individual cases. For these reasons the 

 Government of India agree with the Local Governments of those 

 Provinces in which the rate of interest is at present 6 per cent., 



