Hyderabad: Thanks to the recent demonetisation, hand loans have become cheaper in the grey market. Moneylenders who used to collect an interest as high as 40 per cent are now offering money for less than five per cent in order to get rid of the old notes. Lower income groups and small businesses heavily rely on hand loans to meet day-to-day expenses and such transactions happen
only in cash.

Moneylenders are now getting rid of this unaccounted for cash by disbursing loans at lower interest rates. Lenders give hand loans ranging from Rs 1,000 to Rs 1 lakh without any security. For loans in the range of 1 lakh to Rs 20 lakh, they keep property documents, vehicle documents or blank cheques as security.

“Six months ago, I took a Rs 10,000 hand loan and had to repay Rs 20,000 spread across five months at an interest of Rs 2,000 per month. But now, the same loan is being offered for just Rs 500 as interest per month. They are offering loans in old Rs 500 and

Rs 1,000 notes. We need to exchange them,” said V. Balaji, a store owner. Lenders are approaching those with good repayment records. “When I took a Rs 10 lakh hand loan last year, I needed property documents as security. But now, they are extending such loans without any security.

“Their only condition is that they will give the loans in old notes and they need the money back in six months or one year in new notes,” said B.Shashikanth, who runs a real estate firm.