6. Lending Money at Interest

The Minor Law Books (SBE33), by Julius Jolly, [1889], at sacred-texts.com

6. Lending Money at Interest.

* 98. ⁹⁸ A contract of delivery and receipt may be made with a view to the profit arising from Sthâna. It is called Kusîda (lending money at interest), and money-lenders make a living by it.

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* 99. ⁹⁹ Let a money-lender take, in addition to the principal, the interest fixed by Vasishtha, viz. an eightieth part of a hundred in every month.

* 100. ¹⁰⁰ Two, three, four, or five (in the hundred) is the legitimate (rate of interest). Let him take as much in the shape of interest, every month, in the direct order of the (four) castes.

* 101. ¹⁰¹ Or let him take two in the hundred, remembering the practice of the virtuous. By taking two in the hundred, he does not commit the crime of covetousness.

* 102. ¹⁰² Interest is declared fourfold in this law-book: periodical interest; stipulated interest; kâyikâ interest; and compound interest.

* 103. ¹⁰³ That which runs by the month is termed

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periodical interest. That interest is termed stipulated interest which has been promised by the debtor himself.

* 104. Interest at the rate of one Pana or quarter of a Pana, paid regularly without diminishing the principal, is denoted kâyikâ interest. Interest upon interest is called compound interest.

* 105. ¹⁰⁵ This is the general rule for interest to be paid on loans. There are special rules according to the local usages of the country where the loan has been made.

* 106. ¹⁰⁶ In some countries the loan may grow till twice the amount of the principal has been reached. In other countries it may grow till it becomes three, or four, or eight times as large as the principal.

107. ¹⁰⁷ The interest on gold, grain, and clothes may rise till it amounts to two, three, or four times the principal. On liquids, the interest may become octuple; of women and cattle, their offspring (is considered as the interest).

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* 108. 108 No interest must ever be raised on loans made from friendship, unless there be an agreement to the purpose. Without an agreement even, interest accrues on such loans after the lapse of half a year.

* 109. 109 A loan made from friendship can never yield any interest, without being reclaimed by the creditor. If the debtor refuses to restore it on demand, it shall yield interest at the rate of five per cent.

Footnotes

65:98 According to A., Sthâna, 'continued abode,' may be threefold: relating to the matter, as when profit arises from (the continuance of) victuals remaining well kept in a certain place; or relating to one's own abode, as when a dealer derives profit from business transactions in his own country; or relating to a different place, as when a dealer earns money through foreign trade.

66:99 Identical with Manu VIII, 140. This rule, which fixes the rate of interest at 1¼ per cent. by the month, or 15 per cent. per annum, is actually found in the Dharmasûtra of Vasishtha II, 51.

66:100 Identical with Manu VIII, 142. The meaning is that he shall take 2 per cent. from a Brahman, 3 per cent. from a Kshatriya, 4 per cent. from a Vaisya, and 5 per cent. from a Sûdra. A. It appears, from the commentaries on the code of Manu, that the present rule is applicable in those cases where no security has been given, whereas the preceding paragraph refers to loans secured by a pledge.

66:101 Identical with Manu VIII, 141. The meaning is that he shall take 2 per cent. only from honest men, to whatever caste they may belong. A. In the code of Manu, the present rule precedes par. 100, instead of following it. The author of the Nârada-smriti would seem to have erroneously inverted the original position of the two verses.

66:102 Manu VIII, 153; Gautama XII, 34, 35. See, too, Colebrooke's Digest I, XXXV-XLV.

66:103 103, 104. 'Periodical interest' means monthly interest, at the rate of from 2 to 5 per cent., according to the caste of the debtor. 'Stipulated interest' is interest at the rate of more than 10 per cent., which has been promised by the debtor himself in times of great distress. Kâya means principal. If a Pana, or quarter of a Pana, has to be p. 67 paid every day, without diminishing the principal, i.e. if the whole principal has to be restored, though ever so much interest may have been paid on it, it is called kâyikâ interest. Where interest at the rate of 5 per cent. per mensem has been paid for twenty months, it will reach the same amount as the sum originally due, so that the principal is doubled. After twenty months more it becomes quadruple; twenty months later it becomes octuple, and so on. This is called compound interest. A. Brihaspati and Vyâsa derive the term kâyikâ from kâya 'a body,' and explain that it denotes bodily labour, or the use of a pledged slave.

67:105 Where local customs obtain, differing from the rules previously given, they have to be followed. A.

67:106 106, 107. Manu VIII, 151; Vishnu VI, 11-17; Yâgñavalkya II, 39; Gautama XII, 36.

67:107 Gold borrowed at whatsoever rate of interest shall grow till it becomes double; grain, till it becomes treble; cloth, till it becomes p. 68 quadruple; liquids (and condiments), till they become octuple. The offspring of pledged females and cattle shall belong to the creditor. A.