Bihar’s Silent Debt Trap: How Small Loans Become Lifelong Burdens

In the heartland of Bihar, a crisis brews quietly — not just of poverty, but of mounting debt.

For many low-income families, especially women from marginalized communities, borrowing money is a necessity. But what starts as a small loan for a wedding or a medical emergency soon grows into an unmanageable burden. With limited income and rising expenses, the cycle of debt becomes almost impossible to escape.

When Borrowing Becomes a Burden

In rural areas like Darbhanga, women often gather beneath trees or in open fields, sharing stories of loans taken for essential needs — a daughter’s wedding, treatment after an accident, or a family illness.

Many borrow from a mix of sources:

• Self-help groups (SHGs)

• Microfinance institutions

• Local moneylenders

Some women recall borrowing small sums — ₹30,000 to ₹75,000 — but find themselves repaying nearly double due to unclear interest rates. Most say they were asked only for their Aadhaar card to secure the loan. Paperwork is minimal, but so is transparency.

Agents at the Doorstep

Repayment, however, is anything but simple. Loan recovery agents visit regularly, demanding full payments and using aggressive tactics when borrowers fall short. Women report:

• Verbal abuse

• Threats of police cases

• Confiscation of household goods

Beds, gas cylinders, even basic kitchen items have been taken. Some women say agents told them to beg on the streets, or worse, to clear their debts. For those without male family members at home, the intimidation is even more intense.

Families on the Run

To escape harassment, some families flee their villages entirely. They work in distant states like Punjab, living anonymously for months or even years. While life in unfamiliar places is hard, many say it’s easier than facing loan agents daily.

On returning home, however, the fear resumes. Some agents go as far as taking personal documents like Aadhaar cards, adding another layer of pressure.

Why This Is Happening

Recent studies show a sharp increase in borrowing from non-institutional sources (moneylenders, shopkeepers, neighbors) in Bihar. At the same time, fewer poor families are accessing loans from formal banks or NBFCs.

Even loans from regulated microfinance companies come with rigid repayment structures and interest rates that many can’t afford. Once a payment is missed, the pressure mounts.

Where Is the Regulation?

India’s central bank (RBI) has laid out ethical guidelines for recovery agents:

• No harassment

• Respect for borrower’s privacy

• Repayment schedules should match income flow

But in Bihar, implementation is weak. Unlike states like Kerala or Andhra Pradesh, Bihar lacks state-level regulation for microfinance institutions or moneylenders. Despite elections approaching, this issue finds little space in political agendas.

The Way Forward

The stories from Bihar are a stark reminder that access to credit alone is not enough. What’s needed is:

✔️ Stronger borrower protection

✔️ Fair repayment policies

✔️ Effective regulation of lenders and agents

✔️ Access to healthcare and income opportunities

Without these, microloans — meant to uplift — will continue to push the poorest further into despair.

✍️ What do you think should be done to stop loan harassment? Share your thoughts in the comments below.