They continue to choose private money lenders despite banks such as the State Micro Finance Corporation that have been set up for their assistance.
The plight of auto drivers suffering under private financiers has been long known. But it is no big mystery as to why these auto drivers continue to choose private money lenders over the banks. Or the fact that the State Micro Finance Corporation that was established to ensure the well being of small functionaries like auto drivers has received only a meagre Rs.25 crore allocation in its budget.
A tough situation
Nawab Ali approached a financing agency over a year back to avail a loan for an auto. He secured a loan and began regularly clearing his payments. After 17 months, he was neither issued his papers nor was he allowed to resell the auto as he did not have the papers. Furthermore, the agency cheated him by entering the wrong amount on his receipts.
A case was booked under Section 420 when he reported this to the then DCP Anish Kumar Sinha and now the case is still pending. Nawab Ali is now stuck with no papers or a permit and no way out.
Nawab’s case is not isolated. Union members reveal that about 1 lakh autos ply in the City and more than 40,000 are being financed by private agencies.
A whopping Rs.200 crore is pushed into this grey market but problems arise because of amount recovery — vehicle seizure, forcing the borrower to sign on blank papers etc.
So why do the auto drivers continue to seek help from private agencys? Because the banks are very strict about security deposits, documents like property proof, land patta, pass book etc.
Moreover, high interest rates and the employment of third party payment collectors often deter them from approaching banks.
‘We follow policies’
“We do not drive away our customers but it is our policy to issue loans based on security deposits. Moreover, the Financial Inclusion Program of the RBI has made it mandatory that everybody regardless of their economic background get bank accounts with no strings attached. But with their history of repayment, we are generally edgy about issuing loans to auto drivers who are classified under the “unsecured loans” category,” said an AGM of SBH.
‘Easy to approach’
A private financier from Koti, Ravi Prasad said, “When a borrower defaults his payments we do not carry any surcharges. Moreover, we do not employ hooligans to retrieve vehicles from the defaulters unlike the banks do.
“These people find it easy to approach us as we are lenient in terms of deposits or paper work.”
Currently the interest rates for personal loans is 8.5 per cent above base rate and 18.5 per cent p.a, whereas the private financers charge a paltry Rs.1.20 to Rs.1.50 interest on the amount taken for the first 30 months and then a 2.5 per cent interest rate after this period.
That apart, the State government had set up an able functioning body to cater to the demands of the small business communities like the autowallah’s who are shunned away from other major financial institutions. But the SMFC fails to provide any loan subsidies.
After the State government waived loans during the tenure of YSR, the lending rates have fallen down drastically. And the fact that the annual budget of the SMFC is a meagre Rs.25 crore when the demands are much higher, speaks volumes about the state of affairs.
Shankar, a national auto union member, says, “In this particular case, I do not understand why the auto driver had to take over Rs.2 lakh rupees for an auto that was worth Rs.1,44,000 in the market a little over a year ago. Most of the incidents involving financiers resorting to violence or intimidation is not true and even if it is they are probably card defaulters.
“If the Motor Vehicle Act is scrutinised, it states that the financier has authority to reclaim his vehicle or seize it if the party fails to repay. The government should subsidise loans for the sake of our livelihoods.”
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