Verse 8.153

Sanskrit text, Unicode transliteration and English translation by Ganganath Jha:

नातिसांवत्सरीं वृद्धिं न चादृष्टां पुनर्हरेत् ।
चक्रवृद्धिः कालवृद्धिः कारिता कायिका च या ॥ १५३ ॥

nātisāṃvatsarīṃ vṛddhiṃ na cādṛṣṭāṃ punarharet |
cakravṛddhiḥ kālavṛddhiḥ kāritā kāyikā ca yā || 153 ||

One shall not pay or receive an interest beyond the annual, or what is unapproved (or unaccumulated); nor compound interest, nor periodical interest, nor that which is (privately) stipulated, nor corporeal.—(153)

 

Medhātithi’s commentary (manubhāṣya):

‘Sāmvatsarī’—means ‘pertaining to the samvatsara,’ ‘annual’; what is in excess of this ‘is atisāmvatsarī,’ ‘beyond the annual’; the idea of pertinence being implied by the nominal affix. Or we may first form the compound ‘atisamvatsara’ in the sense of ‘beyond the year,’ and then have the vowel-changes, giving the form ‘atisāmvatsarī.’

The interest that has been sanctioned in connection with all castes,—at the rate of 5 per cent, shall be realised for one year, and after the lapse of the year. Or, the meaning may be that no interest shall be realised during the year,—and after the year the debtor shall not delay the payment of interest.

‘Nirharet,’ ‘shall pay,’—i.e., taking out of his own stock, offer to the creditor; what is paid before the year has expired would also be ‘beyond the annual.’

Or, the meaning may be that at the time of the transaction itself, it shall be determined whether the interest shall be computed monthly or yearly. It would not be right for a man desirous of earning interest for two years, to make the other party accept the loan for that long period the idea in his mind being—‘what would be the use of earning the interest for a few months only?—if the principal is allowed to remain with him for two years, then I shall earn a decent interest.’ In such a case the man would so arrange the advance to the debtor that the interest would be paid after two years. That such a course would not be right is clearly indicated by such texts as—‘one shall neither pay, nor cause another to pay, interest in such a single instalment as may be beyond the power of the man to pay.’ In the case of interest payable monthly, the debtor is made to pay the interest on the second day after the lapse of the month; similarly when the stipulation is that the interest shall be paid yearly, it should be paid on the second day after the lapse of the year,—and not computed by any longer time.

Nor shall he receive what is ‘adṛṣṭā’ ‘unapproved’;—i.e., a rate not sanctioned by the scriptures;—i.e., rates above 5 per cent., such as 10 per cent., or 11 per cent.

Some people hold that this is only a reiteration of what has been said (under 152) that ‘an excessive rate of interest is not payable.’

The right explanation of ‘adṛṣṭā’ therefore is ‘unaccumulated’;—the meaning being that interest shall not be received by the clay, or by the month, until it has accumulated during several months.

“But under 142 it has been declared that one may take ‘monthly interest.’”

What is meant by that is that the interest shall he computed by the month, and not that it shall be received month by month.

‘Compound interest’:—the various kinds of interest from here down to the ‘corporeal,’ should be construed with ‘he shall not pay.’ Though the prohibition is literally addressed to the debtor, yet it is really meant to be addressed to the creditor; for the debtor, being in distress,—what is there that he may not do?

Or, what is directly meant by ‘nirharet’ is receiving itself; so that the prohibition would he addressed literally to the creditor directly.

“In as much as the rates of interest have been fixed at 2, 3, 4 or 5 per cent, there is no possibility of ‘compound interest’ being paid or received: what then is the need of the present prohibition?”

Our answer is as follows:—This prohibition itself is indicative of the fact that it is open to the creditor to charge such interest also. Just as the prohibition that ‘the Brāhmaṇa shall not sing Sāman during Fire-laying’ is indicative of the fact that though no such Sama-singing is actually prescribed in connection with Fire-laying, yet it is open to the priest to do it. Thus the possibility of the various kinds of interest here mentioned being charged is indicated by this prohibition itself. For instance, in the case of men carrying on inferior kinds of business, the ‘compound’ and other interests are actually paid; it is thus that in connection with traders on land and water, etc., varying rates of interest have been prescribed: ‘Those trading in forests should pay ten per cent., those on the sea twenty per cent.; or among all castes people may pay any interest that has been stipulated among themselves’ (Yājñavalkya, Vyavahāra, 38). ‘Interest stipulated among themselves’ has thus been sanctioned by this other Smṛti-text among all castes, in relation to only those that trade in the forest, etc.; so that ‘compound interest’ is not permissible in other eases.

Interest charged on interest is called ‘compound interest,’ ‘cakravṛddhi.’ Others however explain the term ‘cakravṛddhi’ as ‘wheel-interest’; that in the case of wheeled conveyances, like the cart, etc., interest is paid only for those days on which they are used; and on days when the man has to go by boat, in the crossing of large rivers, no interest is paid. In the case of oxen and other things that are used as conveyances, interest is paid in this same manner and it is this that is called ‘wheel-interest.’

‘Periodical interest’;—“Interest computed month by month is called ‘periodical’”—says a text. But ‘month’ is mentioned only by way of illustration; what is meant is that interest which is not allowed to accumulate, being realised day by day, or month by month, and no time is allowed. Another kind of ‘periodical interest’ is that in which the creditor has stipulated—‘if you do not pay the interest at such and such a time, my principal shall become doubled.’

‘Privately stipulated’;—when the creditor and the debtor tlx upon a special rate of interest, in view of each other’s requirements. This also is possible only in the case of distant traders. As for others, it has been declared—‘successive interest is not payable’ and ‘he is entitled to only 5 per cent.’

Or, when what is lent is gold, and what is received in interest is cloth—whose real character is that of a deposit,—it is a case of ‘privately stipulated’ interest; and this would have the character of usufruct, in the case of what has not been kept as a pledge.

‘Corporeal’—payable by bodily labour. This would be possible only in the case of labourers...... (?)—(153)

 

Explanatory notes by Ganganath Jha

‘A creditor may take, for the term of a year, interest which has been settled by the following agreement—“when one, two or three months have passed, the interest on the capital shall be calculated and paid to me at one time”; but he shall not take the interest according to the agreement, if the year has passed’ (Kullūka and Rāghavānanda);—‘If the creditor does not take the money due for two or three years, and the debtor pays then, the creditor shall not take more interest than for one year’ (Govindarāja).

‘Adrṣṭam’—‘Not found (in the Śāstras)’ (Medhātithi, Kullūka and Rāghavānanda);—‘not accumulated by the lapse of several months’ (Medhātithi, alternatively and Nārāyaṇa).

‘Kālavṛddhiḥ’—‘Periodical (i.e., monthly) interest’ (Medhātithi, Govindarāja, Nārāyaṇa and Kullūka, who is not rightly represented by Buhler).—See Nārada —‘Pratimāsam bhavantī yā vṛddhiḥ sā kālikā sṛmtā (smṛta?)’ (‘kālikā’ being the technical name for monthly interest, kālavṛddhiḥ).

‘Kāyikā’—‘To be paid by bodily labour’ (Medhātithi),—or ‘by the use of a pledged animal or slave’ (Medhātithi, alternative, Kullūka, Rāghavānanda and Nandana).

This verse is quoted in Vivādaratnākara (p. 9), which adds the following notes:—‘Atisāṃvatsarī’ is that which has gone beyond a year. The meaning is that if the creditor, suspecting an early repayment of the loan, should stipulate that the loan must continue for a certain time, then he cannot stipulate for more than a year. Halāyudha, however holds the meaning to be that however much be the eagerness of the creditor to earn much interest, he should receive payment before one year passes, and not beyond that.—Nor should he receive an interest that is ‘adṛṣtā,’ ‘not permitted by the scriptures.’—There are four kinds of interest not permitted,—cakravṛddhi, kālavṛddhi, kāritā and kāyikā; these he should not take.

It is quoted in Madanapārijāta (p. 229);—in Vīdhanapārijāta (II, p. 252);—in Nṛsiṃhaprasāda (Āhnika, 36a);—and in Kṛtyakalpataru (67b), which adds the explanation.—‘The interest is to be calculated from the first month upto the end of the year, and not beyond that.’

 

Comparative notes by various authors

Gautama (12.30, 34-35).—‘Some declare that the said rates of interest should not be paid longer than a year. The following are the special forms of interest:—Compound interest, Periodical interest, Stipulated interest, Corporal interest, Daily interest and interest in the shape of using the pledge.’

Nārada (l.102-104)—‘Interest has been declared in lawbooks to be of four kinds:—Periodical, Stipulated, Kāyikā, and Compound. That which runs by the month is Periodical interest; that promised by the debtor himself is Stipulated interest; interest at the rate of one Paṇa and a quarter, paid regularly without diminishing the principal, is denoted Kāyikā interest; interest upon interest is called Compound interest.’

Bṛhaspati (11.4-12).—‘Interest has been declared by some to be of four kinds; by others, of five kinds; and by others again, of six kinds. Kāyikā, Kālikā, Cakravṛddhi, Kāritā, Śikhāvṛddhi, and Bhogalābha. Kāyikā interest is in the form of bodily labour; Kālikā is what is due every month; Cakravṛddhi is interest on interest; Kāritā is interest promised by the debtor; when interest is received every day, it is called Śikhāvṛddhi; because it grows constantly like hair, except on the loss of the head, that is, the payment of the principal. The use of a mortgaged house, or the produce of a field, is termed Bhogalābha. Sikhā interest, Kāyikā interest and Bhogalābha interest shall be realised by the creditor so long as the principal remains unpaid. But the use of a pledge after twice the principal has been realised, compound interest, and the exaction of the interest and the principal together are usury and are reprehensible.’

Śukranīti (4.5.638).—‘Creditors take away people’s wealth by the compound rate of interest; so the King should protect the people from them.’