256 



As long as the ryots repay regularly what they have bor- 

 rowed, they are allowed further advances on the same condi- 

 tions. If there is failure in repayment, a bond or mortgage 

 deed is taken. In the case of hypothecation of property the 

 amount of the loan is about half, and in the case of mortsfasre 

 with possession about three-fourths, of the value of property 

 offered as security. Money on mortgages of land with pos- 

 session is rarely lent except by persons belonging to the 

 agricultural classes. Money is sometimes lent to ryots by 

 persons who have no lands of their own with a view to secure 

 food grains for their household consumption, the stipulation 

 being that the borrower shall pay grain in lieu of interest at 

 the harvest at a rate which is below the then market rate. 

 In some cases grain merchants and dealers in commercial 

 produce make advances to ryots stipulating for delivery of 

 produce at certain fixed rates or at the rate prevailing at the 

 time of repayment mi7ius a deduction in the price on account 

 of interest or at the lowest rate at which grain was sold 

 soon after harvest. Sometimes the ryots deal directly with 

 merchants, but in some cases, especially in the dry parts of 

 the country, brokers are employed. In several cases, ad- 

 vances are made by landholders to agricultural labourers on 

 the condition that they are not to pay interest so long as they 

 work under them for the customary wages, and that, on 

 default, the amount advanced should be repaid with interest 

 at 18 or 24 per cent. Money is also borrowed by the indus- 

 trial classes, viz., weavers, artizans, &c., under what is called 

 "Kandulabha" system. An artizan, for instance, borrows 

 Rs. 300 to make his wares and sell them daily. The interest 

 for the whole amount is taken at Rs. 60 per annum and 

 added to the principal and the whole amount is made repay- 

 able in daily instalments throughout one year at the rate of 

 one rupee a day by the sale of his goods. 



It would, however, be a great mistake to suppose that the 

 rates of interest above referred to, high as they appear, are 

 necessarily usurious. The gross profits derived from the 

 use of capital consist, as is well known, of three parts, viz., 



(1) the remuneration for the labour of managing the capital, 



(2) the insurance against the risks involved in the particular 

 use of it; aTid (3) the interest proper. Taking the case of a 

 ryot borrowing a quantity of grain on condition of repaying 

 at the end of six months the whole of it plus an additional 

 25 per cent., it might seem as if the interest paid were 50 

 per cent, per annum, a most exorbitant rate;, but this is 

 really not so. The price of the grain during the cultivation 

 season is usually 15 or 20 per cent, higher than the price 



