Report No. 63
2A.7. Rate of interest.-
Leaving out of consideration the case of pledge, we find that ordinarily the rate of interest was fixed by law. The rate varied according to the amount of risk incurred by the creditor1; thus, an unsecured debt carried a higher rate of interest than a secured debt; moreover, the rate of interest also varied according to the caste of the debtor; one belonging to a higher caste being liable to pay at a lower rate than one belonging to a lower caste. Incidentally, we may add that this was due to the values based on the hierarchy which was then a part of the social structure.
Then, again, when the lending of the debt involved an exceptional risk-as for instance, where the debtor intended to undertake a journey through a forest, or a sea-voyage after taking the loan, the creditor was considered entitled to claim interest at a higher rate than was ordinarily allowed, in consideration of his incurring the risk of losing even the principal itself. The maximum rates are variously expressed by the various writers, and it is not necessary to go into details.
1. P.N. Sen Hindu Jurisprudence, (1918), p. 307.