A year has passed since the Congress-led United Democratic Front (UDF) Government in Kerala launched Operation Kubera, a high-on-hype crackdown on illegal moneylenders in the state. The government’s action followed a spate of suicides triggered by threats from moneylenders in the unregulated market and was launched specifically in the wake of a five-member family’s suicide in Thiruvananthapuram, after relentless harassment.
The first phase of the operation – that was also launched amid fanfare on social media platforms and mobile apps – has recorded impressive figures in terms of cases registered and arrests made. Home Minister Ramesh Chennithala stated that a follow-up phase was imperative considering that despite concerted, year-long efforts of the police, the “blade mafia” was showing signs of revival.
The second phase of Operation Kubera was launched before the debate around another suicide, of a retired government employee in Alappuzha district, had settled. In its present form, the state operation is morphing into a flashy sequel to a dramatic, successful crackdown on illegal moneylending across the state. Sociologists and financing experts, however, maintain that on the fringes of a simplistic and seemingly convenient portrayal of a crime-and-punishment premise, there is a story of inadequacies and elusive social security that needs to be told as well.
According to statistics released by the home minister’s office, police registered 2,066 cases during the first phase of the operation while charge sheets were filed in 699 of these cases. On July 4, the number of cases registered as part of the crackdown stands at 3,095. Crime Branch SPs coordinate the operation at the district level.
The numbers partly reflect the state’s intent in tackling what is essentially perceived as a crime but only efforts to address the deeper economic problem will make a clinching difference to the operation, feel experts in regional economics.
The unregulated moneylending market in Kerala has flourished without many strictures over the past three decades. Remittances from the world over have translated to surplus money for some sections who do not want to invest this money in regulated sectors and settle for modest returns.
On the other side, rising costs of living have left struggling lower middle class families as borrowers. This demand-supply dynamic is more pronounced in rural, agriculture-driven regions of the state where even moneylenders from neighbouring states are gradually establishing organised, thriving networks.
According to findings in the Situation Assessment Survey of Agricultural Households released by the National Sample Survey Office (NSSO) in December 2014, the average amount of outstanding loan is highest in Kerala (Rs 2,13,600) followed by Andhra Pradesh (Rs 1,23,400) and Punjab (Rs 1,19,500). The government estimates that illegal moneylenders in the state do business of about Rs 2,000 crore in a month.
Harilal K N, Professor at Centre for Development Studies (CDS) in Thiruvananthapuram, says illegal moneylending in the state is defined by the rise of a class driven by a new surge of money, combined with a failure in ensuring justice for the affected. With a huge increase in wealth among certain sections of the society, there is a palpable rush for more investment avenues where huge returns are assured.
“Opportunities of investment in formal sectors like real estate or tourism come with limitations. For the lender, it makes sense to channel the surplus money into the unregulated market. The returns can’t go down – loans for children’s education, weddings in the family, the demand is always there,” says Harilal.
Operation Kubera, while tackling illegal lender rackets on conventional crime-busting mode, is instilling fears of stringent police action. That could be the biggest takeaway from what some still call a “late intervention” of the state. Ironically, reports of alleged involvement of police officials in illegal moneylending have also surfaced.
Jose Sebastian, Associate Professor at Gulati Institute of Finances and Taxation (GIFT) in Thiruvananthapuram, feels that the operation is based on a “wishful thinking” that moneylending outside of government regulations could be wiped out with crackdowns on the rackets.
Social security
The onus is on the government to address the more fundamental concern over inadequate social security mechanisms. “When a labourer suffers an injury and he needs money to run his home, what are his options? Unless there is a system through which he can avail a loan without collateral security or extensive documentation, he’ll approach the local lender even if the interest rate is 10 per cent or more; his needs are immediate,” reasons Sebastian.
The state has witnessed a steady rise in the number of incidents where illegal moneylenders, backed with local criminal gangs, “recover” properties and vehicles pledged by defaulting borrowers. Reports say that most of the suicides triggered by lender mafia threats in the state involve debt that was piled up on unreasonable interest rates.
Recent cases involving threats of property recovery from borrowers also had local cadres of political parties acting as hostile mediators. “When the police and the political system feed off the trend and laws prove ineffective, corrective action becomes a tough ask,” says Harilal.
The government is lining up measures to increase awareness on perils of illegal moneylending while encouraging the public sector banks to provide loans on reasonable interest rates. More stringent monitoring of licensed Non-Banking Financial Companies (NBFCs) is also on the cards.
The awareness has to begin at educational institutions, says Sebastian. “In a high-consumption state where even health insurances are far from norm, the government has to encourage a culture of saving. It should encourage people to join insurance and pension schemes; ultimately, it’s about helping people take ownership of their destiny,” he says.