History of Dharmashastra (Ancient and Mediaeval Religious and Civil Law in India) v4.c63.561
History of Dharmaśāstra (Ancient and Mediaeval Religious and Civil Law in India) v4.c63.561
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Bṛ. (S. B. E. 33 p. 319 verse 1) states⁶⁸¹ that the creditor should always advance a loan after taking an adequate pledge or a deposit (with a mutual friend) or a reliable surety and after committing the transaction to writing or making the loan in the presence of witnesses. The interest may be either stipulated (*kṛta*) at the time of the loan or not stipulated (*akṛta*), as indicated in Viṣṇu VI. 4. Yāj. II. 38 and Viṣṇu Dh. S. VI. 3 state the general rule that debtors of all castes may pay to creditors of all castes the interest settled by mutual agreement and the rate of interest stipulated may be with reference to an article pledged or with reference to a surety given or with reference to a debt totally unsecured. Though this was the general rule, Manu VIII. 153 and Bṛ. condemn taking even agreed interest if it exceeds the rates (to be specified below)⁶⁸² allowed by the smṛtis or taking the agreed heavy interest for more than a year or taking compound interest or more than double the principal or the capitalization of interest. The smṛtis lay down various rates of interest from different points of view. Gaut. XII. 26, Yāj. II. 37, Baud. Dh. S. I. 5. 90-91, Manu VIII, 140 (=Nār. IV. 99), Bṛ. (S. B. E. vol. 33 p. 320 v. 3), Vṛddha-Hārīta VII.
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235 and others state the rule first laid down by Vasiṣṭha that it is just and proper to take every month 1/80th part of the principal lent, so that the principal is doubled in six years and eight months,⁶⁸³ and Vṛddha-Hārīta adds that double the interest stated above may be taken when there is nothing pledged to secure the debt. Yāj. and Vyāsa provide that this rate is the proper one when some thing is pledged or mortgaged by way of security. Yāj. II. 37, Manu VIII. 142 (=Nār. IV. 100), Viṣṇu Dh. S. VI. 2 provide an option that two, three, four or five per cent per month may be charged as interest in the order of the *varṇas*⁶⁸⁴ (i. e. 2 per cent per month for a brāhmaṇa debtor and so on). Yāj. II. 37 allows these rates only if there is nothing pledged by way of security. Vyāsa⁶⁸⁵ (in Par. M. III. p. 221) provided that the monthly rate of interest was 1/80th of the principal lent when a pledge or mortgage was given as against the loan, 1/60th when only a surety was offered and two per cent per month when money was lent on personal security. The Anuśāsanaparva 117.20 condemns to Hell those who take exorbitant interest. Kauṭ. prescribed (as stated in n. 688) fines for taking heavier interest than that allowed by him. Kāt.
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(498) provides that if a debtor himself stipulates a higher rate of interest than is allowed by the śāstra in times of difficulty (in order to induce the creditor to part with his money) that stipulated interest must be paid but a rate of interest imposed by the creditor otherwise (by force &c.) should not be enforced by the Court.⁶⁸⁶ It is probable that these rates are specified because of the economic conditions of those times which proved too much even for the ancient sages or different mercantile usages about interest prevailed in different countries at different times, as expressly stated by Nār. IV. 105-106 that⁶⁸⁷ these high rates (including eight per cent per month) had to be paid according to the law merchant in different countries. Manu VIII. 141 (=Nār. IV. 100) holds that to take two per cent per month (on unsecured debts) is not improper. In medieval times also the rate of interest was rather high e. g. interest at 25 per cent is said to have been charged on a deposit of six *gadyāṇas* kept with the *mahājanas* of Śivapura (vide Yewur Ins. in E. I. XII. p. 273). Yāj. II. 38 provides that those debtors who carry on trade by traversing dense forests and those who are sea-faring traders should respectively pay 10 per cent and 20 per cent per month and the Mit. adds that these exorbitant rates are allowed because of the great danger of the loss of even the principal as the debtors may perish by ship-wreck or from the attacks of robbers and wild beasts. Manu VIII.
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157 leaves the rate of interest in the case of seafaring merchants to those who are clever in these matters and who know the proper time and place. Kauṭ. (III. 11) states⁶⁸⁸ that the prescribed (*dharmya*) rate of interest is 1¼ *paṇa* per cent per month, but in transactions (or in commercial usage) it is five paṇas per cent per month (as the highest, it appears), that those who traverse forests and those who carry on maritime trade should pay respectively ten and twenty per cent per month, that those who exceed or induce creditors to exceed these rates should be punished with the first amercement, that each of the witnesses to such usurious transactions should be punished with half of the above fine.