Chandra Devi, 53, holds up a mortgage slip, its creases extra outstanding than its textual content. It states that she borrowed a mortgage of ₹35,000, allegedly from RBL Financial institution, a non-public sector establishment, in Might 2024. “I’ve to repay the mortgage and an rate of interest of do taka (2%),” Chandra declares. However the slip states that the rate of interest is a hefty 25% over two years.
Chandra is sitting in a mango orchard with a gaggle of ladies at Dekuli Chatti village in Darbhanga district of Bihar. Round her, youngsters climb timber beneath an overcast sky. A few of them clamber to the highest, others dangle the wrong way up from branches. Their moms sit on a yellow plastic sheet unfold over the grass. Whereas watching their youngsters’s antics, they share their struggles on repaying dues. In line with the 2022 caste survey of Bihar, 34% of households within the State earn ₹6,000 or much less per 30 days.
In June 2025, Piramal Enterprises, an Indian non-banking monetary firm (NBFC) targeted on monetary providers, revealed a examine. In it, they acknowledged that the share of Indian households from economically weaker sections of society — that’s, these incomes ₹1-2 lakh a 12 months — who borrowed from formal channels, akin to banks and NBFCs, contracted by 4.2% between 2018-19 and 2022-23. On the similar time, the share of households borrowing from casual or non-institutional sources of credit score, akin to cash lenders, mates, households, and shopkeepers, grew by 5.8%. The info additionally reveals that Bihar accounts for the very best share (18%) of households in India who borrow from non-institutional lenders. The examine was primarily based on knowledge from the Centre for Monitoring Indian Financial system, an unbiased personal entity that serves as an financial suppose tank in addition to a socioeconomic database.
Nevertheless, many households that borrow from non-institutional lenders additionally borrow from microfinance establishments, that are regulated by the Reserve Financial institution of India (RBI), the nation’s central financial institution.
The RBI defines a microfinance mortgage as “a collateral-free mortgage given to a family having an annual revenue as much as ₹3,00,000”. In line with Sa-Dhan, an RBI-approved self-regulatory physique for the microfinance sector, there are 224 such establishments in India.
Whereas loans from microfinance establishments assist impoverished debtors throughout India, debtors are sometimes unable to repay them and fall behind. Additionally they generally run away, fearing that microfinance firms will demand compensation utilizing strong-arm techniques. Because of this, many households stay trapped in a cycle of debt.
When loans turn into nightmares
Chandra belongs to the Musahar neighborhood. Musahars are among the many 18 Scheduled Castes in Bihar who had been recognised as Mahadalits by Chief Minister Nitish Kumar in 2007. They’re socially and economically probably the most backward amongst Scheduled Castes.
Chandra says she doesn’t know the identify of the financial institution from which she borrowed a mortgage; as a substitute, she identifies it by its location — Donar, a locality in Darbhanga. “I used to be requested to offer my Aadhaar card, nothing else,” she says, in regards to the means of securing the mortgage.
The slip she holds says the mortgage was taken for ‘agriculture-livestock/diary/poultry/cattle’ functions, however Chandra, the mom of two daughters and a son, says she borrowed it for her older daughter’s marriage ceremony.
Earlier than the marriage, the groom’s household demanded a motorbike as a part of dowry. Chandra borrowed cash from the village mahajan (cash lender). When that didn’t suffice, she went to a ladies’s self assist group (SHG). Lastly, she secured a mortgage, allegedly from RBL Financial institution.
As Chandra’s husband has been out of labor for a number of months attributable to an sickness, her household relies upon fully on the quantity her son sends house. “He sells apples in Kolkata, so he can not all the time ship cash.” she says. “In spite of everything, every part is so costly today.”
Chandra additionally worries that she has a teenage daughter who will “quickly be of marriageable age.”
Punam Devi, 42, who can also be from the Musahar neighborhood, retains two paperwork near her chest. One reveals that she took a mortgage of ₹40,000, allegedly from Pyramid Finserve, an rising NBFC, in July 2024. Punam borrowed the mortgage for her youthful son, who had been recognized with meningitis. The opposite doc reveals that she borrowed one other mortgage of ₹75,000, allegedly from Utkarsh Small Finance Financial institution Restricted, a industrial financial institution targeted on “offering banking and monetary providers, significantly to underserved and unserved sections of the inhabitants, primarily in rural and semi-urban areas.” This mortgage, borrowed to pay for remedy of her husband who misplaced a leg in an accident, was cleared on March 23 this 12 months with an rate of interest of 28%, as per the doc.
Punam Devi took two loans from two microfinance establishments: one for her son’s remedy of meningitis and the opposite for the remedy of her husband, who misplaced his leg in an accident.
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Punam says she needed to pay installments each fortnight. After her husband’s accident, the household’s revenue is now almost negligible, making it all of the more difficult for them to repay the mortgage.
Each males had been handled at personal hospitals. “We don’t get admission in authorities hospitals,” she says. The opposite ladies nod alongside.
Parvati Devi, 38, says her husband works in Bengaluru, Karnataka, as a every day wage labourer. He left 15 days in the past and can return solely subsequent 12 months.
“We needed to borrow cash for our eldest daughter’s marriage ceremony,” says Parvati, who additionally belongs to the Musahar neighborhood. “We borrowed almost ₹1.5 lakh from the native cash lender 4 years in the past. Unable to repay the mortgage, I took three loans from three microfinance establishments.” Her complete legal responsibility amounted to ₹1.35 lakh and she or he needed to pay month-to-month installments of about ₹7,000.
‘Brokers by no means fail to show up’
Chandra, Punam, and Parvati sought loans for weddings or for therapies in hospitals and struggled to repay the quantities. Many of those ladies accessed microfinance establishments via group lending. On this course of, debtors type small teams and the members of the group are collectively chargeable for one another’s loans.
Banks appoint brokers to get better overdue mortgage funds or excellent money owed. The ladies say restoration brokers by no means fail to show up, and the sum of money their households have is normally by no means sufficient to satisfy the ultimate sum.
This week, a restoration agent stood at Parvati’s door, threatening and abusing her all the day. “I used to be not scared,” Parvati says. “I shouted at him as effectively. He mentioned he would file a case in opposition to me. I instructed him, so be it.” The restoration agent left solely after she managed to place collectively the quantity, which fell in need of ₹1,000, she says.
Mina Devi is because of pay her month-to-month instalment of ₹2,450, however she is ₹50 brief. “He (the restoration agent) gained’t take the quantity till I give him the total quantity,” she complains. Mina worries about his response. “Final time he instructed me, ‘Why don’t you go to the highway and beg? And within the course of when you die, the mortgage will probably be waived off.’” In line with the RBI, when a borrower dies and there’s no collateral, the lender can get better the quantity from the authorized heirs, and solely as much as the restrict of what the heirs inherit.
Mina’s husband spends at the least six months working within the fields in Punjab, so she has to cope with the brokers on her personal. “When a male member of the household shouldn’t be round, the agent hangs round for hours,” she says.
Rekha Devi has three separate loans to repay, with the full legal responsibility amounting to shut to ₹1 lakh. “He (restoration agent) requested me why I don’t promote my physique if I’ve no cash to pay the instalment,” she says.
The ladies say the brokers usually threaten to remove possessions they’ve painstakingly collected through the years — beds, strain cookers, fuel cylinders, even the odd plastic chair.
In Somini Devi’s case, this turned a actuality. Somini’s husband isn’t any extra. She has six youngsters — three daughters and three sons — and all of them are married. She says she has been left alone to repay the loans she borrowed for his or her weddings and for different bills.
“The restoration agent took away every part I had — a desk, a chair, my mattress, the cooker, the fuel cylinder, and even my provide of wheat for the 12 months. He stripped my home empty.” When requested if she reported the incident to the police, she stares blankly. “How can we?” she murmurs.
The ladies say at the least 20-25 households of their village alone have fled fearing restoration brokers. As they begin counting and naming the households, lots of them flip in direction of Pawan Devi.
Pawan took loans from 5 microfinance establishments for her son’s marriage ceremony, however she has been unable to repay the quantity. Pawan and her household fled the village, spent greater than a 12 months in Punjab, and returned solely final week.
Pawan can not recall the identify of the village the place she and her household stayed. “Barring the biting chilly, it was higher there,” she says. “The owner didn’t cost us for electrical energy or water. There have been clear bathrooms. And we had a daily revenue working within the fields.” Pawan says what she cherished probably the most about her keep in Punjab was the absence of restoration brokers.
However the brokers she dreads at the moment are again at her doorstep. “They arrive each different day. Generally they stand exterior for hours. Generally they enter the home and begin rifling via our papers. The opposite day, they took away my son’s Aadhaar card,” she says.
A mortgage restoration agent at Bhawanipur village in Darbhanga district.
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Round 30 kilometres away at Navtol village in Bhawanipur panchayat of Darbhanga district, Mahesh Kumar Roy, who says he’s a restoration agent with Muthoot FinCorp, is on his every day rounds of the village. Mahesh, who hails from Darbhanga, goes from home to accommodate on his bike. He pulls out the sheaves of papers rolled up between his bike handles and runs his finger alongside the names.
“Since 2022, after I joined the corporate, I’ve been given 1,100 households to trace. At the very least 450 households who defaulted on their loans have disappeared. I make common rounds, however all I see is locked houses,” he says. Mahesh provides that individuals “disappear solely after they’ve paid 15-16 installments” and “after we now have managed to get better at the least 60% of the principal quantity.”
Mahesh prides himself as a “first rate” agent. Conscious of the repute that restoration brokers have, he seems to be on the crowd gathered round him and asks them whether or not he’s intimidating or threatening. All of them say ‘no’.
Guidelines on paper
The RBI issued exhaustive tips in 2022 collating the piecemeal directives it had issued earlier. It mentioned that the lenders should “present the flexibleness of compensation periodicity on microfinance loans as per debtors’ requirement”. That’s, the compensation interval of the mortgage should be moulded to the necessities of the debtors, slightly than the wants of the lender. To make sure that microfinance loans don’t unduly burden the debtors, the RBI instructions additionally embody a provision that claims every regulated lender should be certain that the month-to-month compensation burden of a family mustn’t exceed 50% of the month-to-month revenue of that family.
RBI additionally has a separate set of tips for restoration brokers. It outlined what can be deemed as harsh strategies, akin to use of threatening or abusive language, persistently calling the borrower and/or calling the borrower earlier than 9:00 a.m. and after 6:00 p.m., harassing kinfolk, mates, or co-workers of the borrower, publishing the identify of debtors, the use or menace of use of violence or different related means to hurt the borrower or borrower’s household/property/repute, or deceptive the borrower in regards to the extent of the debt or the implications of non-repayment.
Nevertheless, the rules on the curiosity to be charged on these loans merely say that the rates of interest and different prices and charges on microfinance loans “shouldn’t be usurious”, and that the RBI would scrutinise this side of the loans.
Andhra Pradesh, Telangana and Assam have particular rules for microfinance. A number of different States akin to Kerala, Gujarat, Tamil Nadu, Karnataka, Maharashtra, and Madhya Pradesh have legal guidelines regulating cash lenders, which additionally embody microfinance establishments. Meeting elections are scheduled in Bihar in October, however there is no such thing as a political thrust within the State on bringing in any regulatory mechanism on this regard.
Jayati Ghosh, Professor of Economics on the College of Massachusetts Amherst, U.S., says it isn’t stunning that the RBI tips for microfinance establishments usually are not being applied since there’s usually an absence of implementation of State coverage. She additionally says there are elementary flaws within the microfinancing mannequin. “Whereas it makes credit score accessible for the poor, there’s excessive curiosity and lack of monitoring of how compensation is ensured, which permits for threats, intimidation, and strain to tackle a number of loans,” she says. “In lots of locations, linkages with banks via the SBL (SHG-Financial institution Linkage Scheme) have been offered, however these additionally present restricted funds. Solely in States the place these SHGs are successfully co-operatives that create income-generating alternatives (akin to Kerala’s Kudumbashree) has this been extra profitable.”
sobhanak.nair@thehindu.co.in sharad.raghavan@thehindu.co.in