An 1859 law limited the validity of loan bonds to three years. Yet petitions to the Deccan Riots Commission show ryots sinking deeper into debt. Which practice explains this?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Moneylenders forced a new bond every three years, adding unpaid interest to the principal
Option (1) Moneylenders forced a new bond every three years, adding unpaid interest to the principal — Correct. The Limitation Law of 1859 was meant to check the growth of interest. Moneylenders turned the law around: in each new bond the unpaid loan and interest became the new principal, so interest was charged on interest.
Option (2) Moneylenders charged interest at twice the rate that the new law allowed on bonds — Incorrect. The Limitation Law dealt with the life of a bond, three years. Rates of interest lay outside it.
Option (3) Moneylenders gave up written bonds and returned to informal oral loan agreements — Incorrect. Moneylenders were unwilling to give loans without legal bonds. Under colonial rule bonds spread; they did not give way to oral loans.
Option (4) Moneylenders demanded repayment of the whole loan in cash at the end of three years — Incorrect. Moneylenders did not close the loan at three years. They kept it alive through a fresh bond, which is why the debt kept growing.
NCERT (2026-27): “3.6 The experience of injustice … |