Loan shark horror rising in Gujarat as moneylenders work in nexus with bankers

Gujarat, celebrated as India's economic powerhouse, known for its thriving industries and entrepreneurial spirit, features a starkly different reality beneath a veneer of prosperity. Widespread poverty and financial distress have given rise to a shadowy network of illegal moneylenders who exploit the desperate with exorbitant interest rates.

This unchecked moneylending has trapped countless families in a cycle of debt, leading to relentless harassment and, in many cases, tragic suicides. The recent case of a Surat family driven to death under the burden of such loans underscores the grim human cost of this growing menace.

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Recent tragedy

On March 9, a 52-year-old man died by suicide along with his family after repeated harassment by a loan shark in Surat. Bharat Sasangiya, his wife Vanita and 24-year-old son Harsh consumed pesticide at their residence in the city's Amroli area.

Sasangiya, who worked with a diamond cutting and polishing firm, left behind a suicide note saying he took a loan of Rs 20 lakh at a hefty 20 per cent interest for his mother’s medical treatment in 2018. According to him, he had already repaid Rs 30 lakh by December 2024.

“Yet we were being continuously harassed for money for the last several months and asked to pay an added Rs 1 lakh as interest or sell our flat at a distressed price,” the letter said. “I see no other way out than to do this.”

On the evening of March 10, Sasangiya's parents reached Surat to claim the bodies from the Surat Medical Institute of Medical Science and Research.

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Distraught father

“I have lost my whole family at this age. I cremated my grandson who was yet to live his life. I wish he (Bharat) had told me so that we could have handled this together,” moaned Darshanbhai Sasangiya, an 84-year-old farmer who arrived from Kalavad in Jamnagar.

His wife was diagnosed with breast cancer in 2018, Darshanbhai told The Federal. “Our crop production had been low for the past three years and we had taken loans to buy seeds that had to repaid. So, Bharat took money from a money lender in Surat despite my hesitation," he recalled.

“Bharat said he did not want to leave any stone unturned in the treatment of Madhu (his mother). He had a job as a manager in a diamond factory and used to earn Rs 40,000 a month. He repaid the principal amount and was paying back the interest. But he lost his job last December and missed two installments,” a grieving Darshanbhai said.

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“I think that is when the money lender began to harass him. He never told me anything. He was my only son. I would have helped him even if I had to sell my land. Madhu fainted when she heard the news. She thinks her son died because of her,” Sasangiya said, breaking down.

An FIR was filed on March 11 in Surat against Hitesh and Raju, two local money lenders.

Widespread abuse

It is a common phenomenon for poor and lower-middle income families in Gujarat to approach moneylenders after banks turn down their loan requests. The interest amounts charged by the loan sharks far exceed the mandated rate under the Gujarat Money Lender Act, 2011 (GMLA).

Under the Act, a borrower who has provided security can be charged a maximum interest of 12 per cent per annum. If there's no security, the rate can be up to 15 per cent. The lenders often offer a low interest rate initially to lure customers and then escalate it, leaving no choice for the borrowers.

One more suicide

Bhanubhai Jani (name changed) is witness to one such case.

The 43-year-old Jani can’t hold back his tears when he talks about his younger brother who jumped to death in River Sabarmati on his way home from work on February 19 this year.

“He had borrowed Rs 5 lakh from a money lender at an interest rate of 10 per cent per month in 2022 when he began suffering losses in his mobile shop business in Ahmedabad. He had repaid about Rs 10 lakh in various instalments in the last two years.

"But, in June 2024, the lender told him that the interest rate had gone up to 25 per cent. My brother went through a harrowing experience. He made a mistake in borrowing from this lender,” Jani, who now takes care of his brother’s family too, told The Federal.

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Driving one to death

“My brother took the loan to recover from his loss in the business but ultimately he had to wind up his business and find a job as a guard in a factory in Vatva. When the money lender took the papers of his 2-bedroom flat in Akbarnagar, he broke down. He died the same week.

"Now the lender harasses my sister-in-law and me to repay the remaining loan. I think I might have to sell my brother’s flat. The money lender has given a deadline to pay by October,” he added.

Many borrowers approach banks first for personal loans. After their application is rejected for lack of documents or guarantor, they are introduced to loan sharks by bank officials themselves. The borrowers are lured into the ‘easy process’ offered by the loan sharks.

Yet another tragedy

Shyam Bhut, a 33-year-old garment trader of Rajkot, first approached banks for a personal loan to expand his business. But the owner of a small readymade garment shop did not have the required documents to secure the loan. He ended up taking a loan from a money lender —and hung himself in his shop two years later.

Dineshbhai Bhut, Shyam’s distraught father, said his son’s loan applications were rejected by the State Bank of India, Punjab National Bank and Gramin Saurashtra Gramin Bank.

After a friend, Nimesh, introduced him to a money lender, Shyam borrowed Rs 20 lakh in December 2021, the father recalled.

Merciless loan shark

“At the time of borrowing, moneylender Vyas neither clarified the tenure of the loan nor the interest rate. However, a few months later, Vyas told us that the principal amount had increased to Rs 65 lakh and that Shyam had to pay Rs 5.25 lakh a month as interest," Bhut told The Federal.

"Shyam later got to know that Nimesh was part of the nexus. Vyas paid him a per cent of the loan taken by each borrower he introduced. Shyam kept repaying but Vyas was relentless. He would come to our home and threaten Shyam if he got behind the installments.

"He was under a lot pressure. Almost the entire earning from the shop was going to Vyas,” said the 68-year-old Bhut, who now manages his son’s garment shop. “A FIR was registered against Vyas and Nimesh after Shyam died but they got out on bail.”

What rules say

Under the GMLA, private money lenders are required to be registered with a payment of Rs 5,000 and renew the licence every year by paying R 2,000. However, Gujarat police data reveal that more than 40 per cent of the money lenders in the state operate illegally.

According to the police, about 1.6 lakh people became victims of private and unregistered lenders in the last two years alone. There have been more than 1,200 suicides and cases of violence including rape by private moneylenders.

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“These loan sharks have apps or network via WhatsApp to lure clients. Most of them aren’t registered under the GMLA. Besides, a bank charges 10-12 per cent interest annually while private lenders charge anything between 10 to 51 per cent per month,” HM Kangsara, an assistant commissioner of police in Ahmedabad, told The Federal.

Police crackdown

In 2023, the Gujarat police launched a special drive against loan sharks, leading to the arrest of more than 500 unregistered money lenders. Of them, 343 people were involved in using physical violence including rape besides charging hefty interests.

“The drive continued from June to July last year. A total of 134 FIRs were filed across the state,” said Kansara, who was part of the team that carried out the drive.

(Suicides can be prevented. For help please call Suicide Prevention Helplines: Neha Suicide Prevention Centre – 044-24640050; Aasara helpline for suicide prevention, emotional support & trauma help — +91-9820466726; Kiran, Mental health rehabilitation — 1800-599-0019, Disha 0471- 2552056, Maithri 0484 2540530, TN health helpline 104 and Sneha’s suicide prevention helpline 044-24640050.)