Class Notes Of Hundies.docx

Hundis: We, in India, are more familiar with hundis as they are commonly used. They are internal bills of exchange in one of our own languages, and have been prevalent in India long before the dawn of civilization elsewhere. Hundis are Darshani (sight bills) and Miadi or Muddati (time bills) on the basis of the time allowed to the debtor. Hundiana is the commission sometimes deducted by the lender from the amount advanced. Specimens of the two types of hundis used in India (translated in English) are given below:

Literature Review of Money Lenders Issue

Discussion 

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Advantages of money lenders 

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Disadvantages of money lenders

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Relationship with Banks

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References

They usually provide short-term finance of small loans - which is ideally suited to lowincome groups, who cannot digest' larger loans, and do not prefer long-term commitments. They provide loans to borrowers expeditiously and in a flexible manner, thus making finance available immediately, when it is needed and with a minimum amount of paper-work and official requirements. They function in close physical proximity to the borrower, enabling frequent contact and thus dispensing the need for collateral requirements. They do not have fixed business hours, and therefore provide loans as and when requests are made. They are unorganized and do not have any contact with other sections of the banking industry They combine money lending with trading and commission activities and thus introduce risk into their business. They do not distinguish between short-term and long-term finance and also in the purpose of the loans. They follow traditional methods of keeping accounts and do not give receipts in most cases. They charge high rates of interest in proportion to banking institutions. Money lenders play a useful role in providing credit loans to sectors not supported by commercial banks. Money lenders may borrow from commercial banks during high demand for credit, by using bills of exchange or their own funds as security.

Sundharam, 1996: 523-527 Tannan,1954:9-21 GoK, 1968 ADB, 1990

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Key Implications of Money Lenders: 

Credit provided by money lenders is timely that is, it is available immediately when it is most needed - need for quick/timely credit. They do not maintain regular business hours, and usually work throughout the day - thus making themselves available to borrowers at any time - flexible business hours. They live or work close to the residences and work places of their borrowers, and are hence easily accessible - close physical/psychological proximity.