Understanding the Concept of Usufructuary Mortgage in Indian Society

Abstract

A country like India, where society is close-knit, a dominance of the informal credit market is seen. Its market is far from perfect, transactions in goods and services are often done in so-called interlinked contracts. The rural-agrarian society of India, in their time of need, arising due to a natural calamity (drought, flood, etc.) or a family emergency (weddings, funerals or life-threatening diseases), tend towards mortgaging their land to get cash. In many of such circumstances, the moneylender does not charge any direct interest over the principal loan amount, instead, he receives a piece of immovable property, mostly agricultural lands, along with the right to cultivate such land and the profit earned acts as an indirect interest over the loan amount.