260 



the fall in the rate of interest which ^^^ was then 12 per cent. 



at least (then called dharma vaddi, i.e.y equitable interest) and 

 is now nearly 6 per cent. Time has come when ryots are 

 able to take advantage of any help that may be rendered to 

 them to organize a system of mutual credit. By getting a 

 small loan for a bullock or two, by industry and economy, 

 they become in time proprietors of a plough and a pair of 

 cattle and are able to maintain themselves independently. 

 As farmers they are able to repay their loans, which as ser- 

 vants they were not. By dint of exertion and thrift they are 

 even able to purchase a sinall piece of land and attain the 

 status of proprietors. Rich landholders, on the other hand, 

 have been losing ground. The sons by partition get only a 

 fraction of their patrimony, while their family and expendi- 

 ture are in many cases equal to or greater than those of 

 their parents. They involve themselves in debt and have 

 ultimately to part with their lands. They become poor, and 

 by hard necessity understand their position and try to lift 

 themselves with those who were originally poor. The lands 

 are passing from them to vakils and Government officials " 

 (appendix VI. -0. (7)). The District Registrar of Tinnevelly 

 remarks " the higher classes, who were sole landholders before, 

 have become impoverished and have given up their land little 

 by little, whereas the poor labouring classes have acquired 

 land by dint of their economical savings. As agricultural 

 profession is found to be more safe and secure by the lower 

 classes, they lay out their earnings on landed property." 

 The Honorable P. Chentsal Rao in discussing the question 

 which forms the subject of this Memorandum observes, 

 " You may ask, why is it that, in spite of all the improve- 



"' The inscriptions in the famous temple at Tanjore show that loans made to indi- 

 viduals or village assemblies in the eleventh and twelfth centuries out of temple funds 

 paid interest at the rate of 12^ per cent, per annum. Even now, the usual rate of interest 

 cannot be said to be so low as 6 per cent. It must, however, be remembered that most 

 of the transactions in former days having been carried on by barter, the demand for 

 money must have been much less than at the pi-esent day. Leaving out of account 

 usurious transactions, the ordinary transactions were between persons belonging to the 

 same community, thoroughly known to each other, generally kinsmen or co-religionists. 

 Money was lent not for the sake of profit, but with a view to relieve the necessity of 

 the boi-rowers. The interest taken was small, and no security was demanded, the only 

 witnesses to the transaction being the "sun and moon"; such transactions were 

 necessarily few. When lending becomes general, and the dealings are between 

 strangers, greater security is demanded and the rates of interest are determined with 

 reference to mercantile considerations ; and the rates thus established are applied also 

 to loans to persons who as kinsmen or friends of the lenders would formerly have been 

 granted easy terms. This change is due to the extension of the system of credit and 

 not to any loss of " confidence " as between borrowers and lenders as is sometimes sup- 

 posed. Another circumstance which has possibly tended to keep up the rate of interest 

 is the diminishing purchasing power of money. If the princixjal sum be not expected 

 to be worth as much when returned as when lent, the difference must be made good 

 by the rise in the interest. It may be doubted whether the lender is Consciously in- 

 fluenced by this consideration, but these matters have a tendency to adjust themselves 

 automatically. 



