Reports that a committee constituted by the Reserve Bank of India (RBI) is proposing to legitimise moneylenders has sent shock waves among those working at the uplift of farmers, landless labourers and the rural poor. The proposal to “bring this organised source of credit disbursal under the regulatory framework so as to tap its reach” (as reported by an agency) may sound laudable, but seems unworkable. Already, the RBI does not have the means to supervise tiny cooperative banks or regional rural banks adequately. Moneylenders, with their powerful political connections lend to rural folk at anywhere between 40-120 %. Merely registering them and prescribing a set of rules will hardly help because there is little that the RBI can do to prevent exploitation. In fact, it is safe to bet that bank officials themselves will be threatened and stopped from reporting their dubious exploits. Moneylenders have been one of the biggest causes of rural misery. They usually control the village panchayat and their usurious interest rates and terror tactics are the main cause for tiny and marginal farmers to lose title to their lands or turn into bonded labour. The Indian Express has already exposed the political muscle of the biggest moneylenders in Maharashtra, which has seen the worst farmer-suicides. For some time now, banks have proposed to enter rural markets by working through NGOs and Self Help Groups (SHGs). If chosen carefully, these groups can marginalise money-lenders and give rural Indians a real opportunity to better their lot.
So why this quiet attempt to legitimise moneylenders and worsen the nightmare of rural exploitation by providing them access to more funds and refinance? It is possible that banks too would prefer to work with moneylenders rather than NGOs. After all, they notoriously employ recovery agents with mafia links in cities. In rural India the moneylender comes with a recovery mafia in place. A leaked committee proposal has little legitimacy, but civil societies must wake up to the danger of such a move.
The government has made much of the Annual Information Report (AiRs) that will allow tax authorities to keep tabs on high spenders. A top Income Tax official says that although banks have dutifully reported high value transactions, the back-end infrastructure to use this information effectively is not in place. So the Income Tax (IT) has indeed collected vast amounts of data and broad details like the number of people who have not reported PAN with high value transactions.
But the attempt to link it to actual tax returns has exposed a big mess. The department needs to concentrate on clearing up the PAN card mess and eliminate fakes, forgeries and duplicates to make the AIR information meaningful. Until then, it can only create fear through random cross-checking of AIRs with tax returns.
The accuracy of electronic returns and problems with individuals having no physical proof of payment will manifest itself in the coming months and will also have to be set right, say our sources. Maybe the Finance Ministry should take a rest from conjuring new taxes until the tax collection machinery is fully computerised and cleaned up?
Shut mouth threat
Faisal Farooqui, CEO of the hugely popular customer review website called www.mouthshut.com has written to his readers about an extortion attack that exposes another facet of the criminal element lurking on the web. Faisal’s office received an extortion call demanding a payoff to avoid causing the mouthshut community to disintegrate. They ignored the call thinking it was a prank. Soon enough, a series of nasty emails full of “hateful content, innuendo and lies” was unleashed on subscribers, forcing the CEO to file a complaint with Mumbai’s cyber crime police. More interestingly, he received another email boasting about the “successful negative campaign”. “have you seen my power. yes I am the one who started this wave against vices (sic) at MS”, it said and offered to start a similar “positive campaign” on “better utilisation” of his “service”. Mouthshut has blocked a series of email IDs linked to a common originator. However, it shows that anyone with a web presence can be targeted by vicious extortionists; what is worse, readers need to be careful about “positive” reviews too, because those can also be engineered through dubious operators.
Steel magnate Lakshmi Mittal’s weddings and other celebrations make international news, but the younger brothers, whose group remains in financial trouble, throw equally lavish galas that are kept very low key. For instance, when Vinod Mittal celebrated his silver wedding anniversary in Prague in May, a load of Bollywood entertainers —including sisters Shilpa and Shamita Shetty and singer Sunidhi Chauhan— were flown to entertain the guests. Company officials went back and forth to organise the event, but it was not allowed to make a splash on Page 3 (merely refusing to pay for the publicity guarantees anonymity today!) because banks to who the Mittals owe money will find it difficult to explain why repayments are sluggish when celebrations are in top gear.