PROVISION OF BORROWING FACILITIES. 271 



confer a wide rule-making power upon Local Governments while 

 indicating certain heads under which it will probably be advisable to 

 exercise it ; and we declare that the provisions of the Indian Companies' 

 Act shall not apply to societies registered under the new law. 



There are four points of some importance as to which the Bill is 

 silent, but which have been much discussed, and with great diversity 

 of opinion ; and I may perhaps briefly indicate why our proposals 

 include no provisions regarding them. The first is, the objects with 

 which these societies may make loans to their members. It has been 

 strongly urged that no loans should be permitted except for productive 

 expenditure, and specially that they should not be granted for such 

 purpose as marriages and the like. We recognise that there is much 

 to be said both for and against the proposal ; but we have finally 

 decided to reject it, mainly on the ground that whatever restrictions 

 might be imposed by law, it would be impossible to enforce them, 

 while their mere existence would encourage evasion and deceit. More- 

 over, we are not without hope that the fact that a society refuses 

 to lend more than Us. 50 to a member for a marriage, as being as 

 much as he can hope to repay, may not unfrequently lead to his 

 limiting his expenditure to Rs. 50 instead of going to the money-lender 

 for Rs. 100. 



In the second place, it has been suggested that a summary 

 procedure for the recovery of debt should be placed at the disposal 

 of these societies. It is true that the recovery of debt by civil suit 

 is a tedious process, and that a society of the sort we are considering 

 is perhaps the least fitted of all agencies to conduct such a suit. But 

 it is a serious matter to place our executive machinery at the disposal 

 of a private creditor. And, above all, such artificial assistance would 

 discourage the exercise of that vigilance and caution upon which these 

 societies should depend for their security. With the local knowledge 

 which will be at their command, they should, if they conduct their 

 affairs prudently, hardly ever need to have recourse to a Court. 

 Their strength should lie in that knowledge, and not in any special 

 process of recovery. In the rule-making section we have authorised 

 Local Governments to provide for the settlement of disputes by 

 arbitration if a society so wishes ; and we do not propose to go 

 further. 



In the third place, we have been urged to prohibit compound 

 interest. We have had no hesitation in rejecting this suggestion. 



