Bihar’s ‘goonda banks’ lend dreams, extract a heavy toll in return
PURNIA/KISHANGANJ: In February 2020, a family of three was found dead in their home in Katihar. The door was locked from the outside. Police investigations revealed that a businessman, 42-year-old Manish Jha, first killed his three-year-old son Samrat by feeding him poison, and then he and his 35-year-old wife Mona hanged themselves from a ceiling fan. The reason for ending their lives was not unusual in India — an unwise loan from a private predatory moneylender, and the ensuing harassment.
But places that lend money at high interest rates, and then employ thugs designated as “recovery agents” to collect several times the principal amount, are so ubiquitous in Bihar that it has a name all of their own — “goonda bank”, or criminal bank.
In Jha’s case, in 2019 he started a mobile phone store in Katihar for which he took a ₹50 lakh loan from a commercial bank. It turned out that the amount wasn’t enough. So, he went to a local moneylender — he borrowed between ₹20 and 25 lakh from local moneylenders, at an interest of between 10 to 12% per month.
“My son-in-law was neckdeep in debt. He borrowed the money from a local loan shark in the hope his business would survive,” Mona’s father, Rajesh Kumar Jha, said.
Though Manish Jha sold ancestral property worth ₹1.5 crore in 2019, it wasn’t enough — ₹13 lakh was still outstanding, and kept rising; these private money lenders charge an interest of between 10 to 12% per month, as opposed to the traditional banks that charge around the same rates but per annum.
Over time, the moneylenders became aggressive. They allegedly attacked him, threatened, and abused him. Then, they began targeting his wife, telling him they would do unspeakable things. On February 25, 2020, the family could take no more.
HT travelled to the four districts of Seemanchal — Kishanganj, Katihar, Purnia, and Araria — and Bhagalpur and Madhepura in Kosi district to find that predatory lending in Bihar preys on the financially vulnerable often with devastating consequences. The Katihar suicides have once again shone light on this practice, leading to a high court-ordered Special Investigation Team (SIT).
The unravelling
In the days after Jha’s murder, a case was registered under sections 306 (abetment to suicide), 120-B (criminal conspiracy) read with section 34 (common intention) of the Indian Penal Code (IPC) against Lalan Kumar Singh, Kishor Kumar Singh, Manoj Yadav and Bambam Acharya — three of the four are moneylenders, while KK Singh is also a lawyer — at the Muffasil police station on February 26, 2020. During the investigation, the police discovered a suicide note which alleged “torture”.
Of the four accused, Manoj Yadav and Kishor Kumar Singh were granted bail, while the bail petition of Lalan Singh and Acharya is pending in the Patna high court even as the court has stayed their arrests.
On October 28, 2021, the Patna high court observed that “goonda banks” were being run in the Seemanchal region of Bihar, with loans given out at high interest rates leading to the extortion of gullible people. The bench of justice Sandeep Kumar ordered that the investigation should be supervised by an SIT.
In February 2022, the Bihar Police constituted the SIT to look into the role of such banks operating in the Seemanchal and Kosi regions. The SIT, headed by ADG Kamal Kishor Singh, has submitted its report.
According to senior officers part of the SIT, in the eight months that it was in existence, it submitted a list of 547 people to the Income Tax department, asking for them to be profiled. In Purnea alone, police officers said that they have zeroed in on 300 people who operate a web of parallel banks, or “goonda banks”, and have managed to collectively procure hundreds of plots of lands from borrowers who could not repay debts. “Police have started scrutinising such people in the wake of the list received from the state headquarters,” Purnia superintendent of police Daya Shankar said.
Officials said that the list of 547, from across 10 districts in Bihar, shows a vast difference between income tax returns, bank deposits, and their assets and capital investment.
The origins
Police say the coinage of the term “goonda banks” can be traced back to the Kosi region in the early 1990s — a tumultuous time in Bihar’s social and political life, with high unemployment and a crumbling administrative system. For those who sought capital, there was little option but predatory lenders.
And for many young people, these “goonda banks” were both a source of employment and social capital.
Senior officers said that there were two blocks under the Naugachia police station limits in Bhagalpur district — Ranggra and Gopalpur — that gained particular notoriety. “The three villages of Teentanga, Rangra and Gosaigaon were centres of these goonda banks and musclemen used to operate them until the first decade of the 2000s,” an officer said, asking not to be named.
“These people spread propaganda against the formal banking system, and took advantage of the vacuum in places that were not well-connected with regular banks,” said Amit Anand, a social activist who works in the Kosi belt.
Buoyed by its growing success, the “Teentanga model of moneylending”, as it was then called, spread to the districts of Madhepura, Katihar, Kishanganj, Navgachia, Purnia, Khagaria. “Banks started opening here — Shivgauri Yuva Samiti, Maa Veena Vikas Samiti, Sharda Vikas Bank, Maa Vishhari Vikas Samiti, New Saraswati Gramin Bank. These names were given by the people running goonda banks to attract people in the name religion or God,” said Shankar Rai, a resident of Banmankhi.
These banks do not exist physically, with no hoardings or signages, but operate from hole in the wall rooms, or out of private residences.
One money lender, from Banmanki in Purnia, who did not want to be identified said, “The practice of money-lending has been in vogue for several decades. The money is provided to those that need it desperately, and of course the rates of interest are higher compared to the banks, which is what makes them feasible. Most that come to us are businessmen, villagers who need money for marriages or for medical emergencies. A lot of the stories of harassment are exaggerated, but of course the loans need to be paid back at the pre-determined rates.”
“At one point of time there were one room offices at Magah Chowk, Bus Stand, Rehman Chowk at Banmankhi of these lending houses,” Shankar Rai said.
Recovery by harassment
In June 2022, the Samastipur police found the bodies Manoj Kumar Jha (35), his wife Sundarmani, his two sons Shivam and Satyam, and his mother Sita Devi, hanging in their home in Mau market. Jha’s daughter Kajal alleged in her complaint to the police that her family had borrowed ₹3 lakh from a private moneylender, Mannu Jha, five years ago. In that period, the money owed rose to ₹17 lakh, and Jha and his associates killed the family to grab their land, she alleged. Though a police probe said that the family appeared to have killed themselves, Mannu Jha was arrested under sections 302(murder) and 306(abetment of suicide).
In Purnea, 60-year-old Ganesh Rai spoke of his life spiralling out of control because of a “goonda bank”.
“I borrowed ₹20,000 in 2010 at the interest rate of 20% from Mahakant Rai, who used to have an office in Banmankhi market, to open a paan shop. But in one year, the lenders began demanding ₹50,000 back. I had to pay the money by selling off my land and my wife’s jewellery. Today, my wife and two sons work as migrant workers in Delhi, and I survive by running a tea stall,” Rai said.
Locals in the Mirzapur village of Katihar allege that, in 2006, a resident, Ramanand Mahto, killed himself after being unable to repay a loan. “He had taken ₹10,000 because he needed money for his farm from a ‘goonda bank’ being operated by a man in Khagaria. The loan trebled within six months. He poisoned himself, and no police case was filed. There are several such cases in neighbouring villages but nobody comes forward out of fear,” said neighbour Shyam Lal Mahto.
In each of these cases, the pattern was similar. Those desperate for loans approached moneylenders who offered money at high interest rates. There was no written record, and everything was by word of mouth. The recovery process was marked by threats of assault, kidnapping, and the forcible takeover of property.
Most “goonda banks” have no office, but maintain an army of armed recovery agents, Nitesh Kumar, a resident of Banmankhi in Purnia said. For those seeking loans for weddings, businesses, crop sowing or harvest, the simplicity of the process is the draw. All that needs to be done is signature on a stamp paper, and the loan is given within minutes, Nitesh Kumar said.
Experts said these “goonda banks” point to a larger problem.
“Behind the flourishing of such institutions of money lending lies the basic failure of institutional finance,” said DM Diwakar, a former director of the AN Sinha Institute of Social Studies. “The process of getting loans in banks is cumbersome, and many people do not get loans on time. Under such circumstances, they fall prey to moneylenders who easily provide loans at high rates of interest.”
The All India Debt and Investment Survey (AIDIS) conducted by the National Statistical Office (NSO) said that Bihar is the among four states in India (the other three are Manipur, Nagaland, and Arunachal Pradesh), where the incidence of debt (share of households having debt) from non-institutional sources is more than that from institutional sources.
Sudan Sahay, a social activist based in Araria, said, “Often, the agents recruited by ‘goonda banks’ encourage the poor and illiterate to borrow money for small rituals and later fleece them.”
In 1974, the government under chief minister Abdul Ghafoor introduced the Bihar Moneylender Act, which mandated, among other things, that there could be no rate of interest exceeding 12% per annum in case of a secured loan, or 15% for an unsecured loan.
The Act also said that it would be unlawful for moneylenders or agents to recover more than double of the amount advanced by them, or in a case of a loan in kind, one-and-a-half times the amount. Violation of the act was deemed punishable with imprisonment for up to one year, or a fine of ₹500.
“The Act has turned out to be completely useless. They have not been able to implement it,” Diwakar said.
ADG (headquarters) J S Gangwar said that since the matter is sub-judice and the SIT formed has submitted its report before the HC, he did not want to comment on the issue.
Most in Kosi and Seemanchal in Bihar though told HT, that there was little hope for change. The material conditions that lead to predatory lending; the inaccessibility of banks, poverty, and the need for quick money are an enduring combination. But for families like those of Manish Jha, that there is now oversight from the court, is one small step forward to a sense of justice.