Raju and the magical goat by rbi

December 2008 Financial Education Series Issue-3 Basic Banking Raju and The Magical Goat Hkkjrh; fjt+oZ cSad RESERVE BANK OF INDIA www.rbi.org.in

In this booklet, Raju talks about the loan facilities offered by the banks. The saga of Raju's adventures is also available at www.rbi.org.in/financialeducation Story by Manoj & Shailaja Art by Anupam Sharma For more information or to get this comic book, you may please write or call: Reserve Bank of India Financial Literacy Cell 6, Sansad Marg New Delhi-110001 011-23710538-2272/2079(Extn) 011-23765234 Email id:flcnewdelhi@rbi.org.in I

Raju was living happily in his village. He had become a famous person by helping others. Raju & the Magical Goat One day when the air was burning with Murli was a poor farmer in the same scorching heat and there was no trace of village who was barely able to make water, one of his bullocks died of exhaustion. both ends meet even after a day's hard work. Oh God! One of my bullocks is dead. How will I plough my field now? 1

He went home and told his wife We can't plough our fields with one bullock. Even Champa about this misfortune. this one is looking pale and may die anytime. Will She was also shocked to hear we have to starve to death this year? this. I will meet Sunder and Chander. I have heard What are we going to do now? that they always lend money to people in need. The two brothers Sunder and ... They were notorious for cheating the poor. ... Chander also lived in the same village. 2

So your problem is Ahha Murli! Nice to see you. But why are that you can't plough you looking so sad? your field with one bullock. I am going through a real bad time....... Don't worry. Whenever people are in trouble they come to us. We Murli narrated his whole problem. really like to help people. Now tell us, why do you want to plough your field? How? We can give you something that can make you so rich that you would not be required to plough your field for the rest of your life. 4

Do you see this goat? It is not an ordinary goat. Its milk has got magical powers. Anybody who drinks its milk cannot forget its taste all his life. ar Sug It gives ten buckets of milk everyday and it is so sweet that you do not need to add any sugar. You can make plenty of sweets out of the goat's milk everyday and sell that Soon you will have enough in the nearby market. money to start your own shop. With one shop that does good business, you can soon put up ten more shops and very soon you will become a very rich businessman. 5

Yes! Yes! I will become a rich Oh! I really don't have any businessman. It sounds so easy. money. Please give this magical goat to me. But this goat is precious to us. What will you give in return? Don't worry Murli. We really want to That land is in any case useless for you help you. You give us your land in now. And you can repurchase it from exchange for this goat. us once you become rich. 6

Oh! I understand. Ok, I will give you my Congratulations Murli. This magical land in exchange for the goat. goat is now yours. Chander brings out a paper on which he writes that Murli has given them his piece of land in exchange for the goat. Murli puts his thumb impression on the paper. Champa is shocked to hear that he exchanged their land for the goat. And your land is now ours. How could you believe whatever they told you? If becoming rich had been Remember us when you so easy they would have never given become rich. this magical goat to you. Murli happily goes home with the goat. What should I do now? 7

I think you should go and meet Raju and Murli left in search of Raju. Gopi Chacha. Raju is knowledgeable and Gopi Chacha is very wise. They always help people in need. Raju was sitting along with Gopi Chacha, Shamu, Bhola and Go pa l. Murli joins them and narrates his full story. 8

But it will cost a lot of money. Where Oh I see! Sunder and Chander have will I get the money from? tricked you. Anyway, don't worry. Let's see what we can do to get your land back. And then get you a new bullock . Well, you can take a loan from the bank and purchase the bullock. And you can repay your loan with the But Raju, will the bank give loan to Murli money you earn later by selling your Chacha for a bullock? He has nothing produce. left with him now. Why not Gopal. Banks give loans for a variety of purposes. 9

For purchasing a tractor, seeds, fertilisers For all these purposes, even our and farming equipment. moneylender Dhaniram will give a loan. Then why should we go to the bank? Banks also give loans for constructing a house or a shop or starting a business, for buying vehicles for taxi service, rickshaws, for education, etc. Banks also give loan to purchase a bullock. So you have to pay him Rs 105 every Okay. I will tell you the reasons. Suppose month. This will take you one year to you take a loan of Rs 1000 from Dhaniram. repay the entire amount of Rs. 1260. He asks you to repay Rs 260 as interest on Do you know how much interest he the loan. has charged you? 10

All look puzzled. Now let us see how much interest the 26 percent ! bank will charge. Banks charge normally upto 7 percent interest per annum on loans. Loan Application In fact, moneylenders like Dhaniram may charge interest as high as 100 percent. Let's say your bank asks for 7 percent interest for giving loan to purchase a bullock. It means that you pay only RS 70 as Then there is one more benefit. You interest on a loan of Rs 1000 from the will not have to sign any blank paper in bank. Is it not better? the bank! Lo Appli an catio n 11

You mean I can actually save money at Oh my God! I can't believe it. How foolish the end of one year if I take a loan from we were to run to Dhaniram and sign a the bank? And I will also not be bonded blank paper to get a loan from him! to it for my lifetime? Yes, of course. And we never listened to the bank Yes. No doubt, banks have some manager who kept telling us to take formalities and paperwork but that is in loan from him. In future, we will take your interest. loan only from a bank. Also, remember, banks give loans only for genuine needs and productive activities and not for activities like gambling and drinking. Only if you earn, you will be able to repay your loan, right? 12

Raju, I want my daughter Tara to In fact they give loans for studies within become a doctor when she grows up. the country as well as abroad. Will the bank give loan for her study? Yes, of course, banks do give loans for education and higher studies. All you will have to do is to submit The bank will give the loan to documents like mark sheet of the cover the tuition fees, hostel , qualifying exam, admission proof , estimate expenses ,etc.,as given by the of fees, hostel expenses, etc., as provided college. by the college/university. MARK SHEET English 100 70 MARK SHEET Hindi 100 60 English 100 70 Hindi 100 60 N maths 100 75 ISSIO maths 100 75 ADM OOF Gen sci 100 99 Gen sci 100 99 PR Sanskrit 100 75 Sanskrit 100 75 So sci 100 65 So sci 100 65 444 444 Education loan covers the entire period of study and repayment starts only after education is completed. 13

In other words, once Tara completes Oh yes! Banks have a scheme called her studies and starts earning, she can the Kisan Credit Card (KCC) for the herself pay back the loan. farming community. Raju, we regularly need loans for purchasing seeds and fertilisers. It will It is very convenient. First the bank will be a problem if for each loan we have to assess all your farming and consumption follow the entire process of application. requirements and sanction an overall Is there a way out? loan limit. This will be given in the form of a credit Then how do I keep track of my card, called Kisan Credit Card (KCC). repayments? with this card, the farmer can draw money for his short term needs of seeds, fertilisers, consumption, etc., and pay back as soon as he can. He can also draw You need to repay the amount withdrawn money under this credit card to dig within a year. KCC is available for any wells, buy tractors, bullocks, productive activity. implements, etc. 14

Banks also issue General Credit Card Under GCC, banks do not insist on (GCC) for saving account holders. security and the purpose or end- use of the credit. The limit will be periodically reviewed and revised/cancelled depending on your track record as an account holder and the repaying capacity. What about loan for a house ? Banks have many housing What is that? loan schemes under which you They will also tell you how to apply for can apply for a VOTE R R the loan. Repayment of loan can be made I CAD housing loan. on a monthly, quarterly or half-yearly basis. The repayment periods may be from one year to nine years depending upon the amount of loan and your repaying capacity. For taking such loans you will need to LOAN N ICATIO APPL produce documents like proof of identity, address and income. When you visit a bank to take a loan, they will give you the details of all the documents that will be required. 15

Will the bank ask me to mortgage my land Hypo…what?? for this loan? Hypothecation and mortgage means Yes, the bank will ask for some security that the tractor and the house you have against the loan. But it will accept as purchased with bank loan will be in your security the tractor or the house that it name and possession and you can use has financed. The tractor will be them. But the bank will recover the hypothecated to the bank and the house amount from the sale of tractor/house will be mortgaged to the bank. if you fail to repay the loan. Only the bank's name will be registered in the books of the Road Transport Authority as 'Hypothecated to’ to indicate that the bank has taken the tractor as security for the loan and you cannot sell it without asking the bank. RTA Even when you sell it with bank's permission you will first have to repay the bank loan from the money you get by selling the tractor. 16

But why would I sell the tractor when The bank will give you the housing loan in the I need it to plough my land? In fact, I same way. You will have to mortgage the house would also want some more money for for the housing loan. my house. It means that the land records will show that the bank has interest in the house and you cannot sell it or give it as security for another loan without informing the bank. The land ownership documents will be held How is that? in the custody of the bank till the loan is repaid. Always remember. Repaying a loan in time is as important as taking the loan. If you do See, you take a loan of Rs 1000 at 5% not repay in time you will be charged interest which means Rs 50 is the interest amount . interest on interest and the loan will become a burden on you. 17

So at the end of the year you have to Also, unless you repay, the bank will not repay Rs 1050. Now, if you don't repay be able to provide loan to another your due amount to the bank, it becomes needy person. Repaying loans is a RS 1050 and the 5% interest will now be responsibility you owe not only to the charged on RS 1050. bank but also to the society. So you will have to pay more interest next year and so on. In fact, some banks have the facility of We should remember that when we repay, a credit counsellor whom you can meet the money goes as loan to another person before taking a loan. and he too prospers. This way we all can contribute to each Credit counsellor? Who's others' prosperity! that? 18

Credit counsellors provide advice and Be it for study, house or any other information to people who need credit. personal need, you can approach the credit counsellor of your bank and he will guide you about it. They will tell you which loan you should take, how much and also how to make the best use of these facilities. Raju, you are our counsellor and our friend. Listen, my plan is like this… Raju, we still have to help Murli to get back his land. I have a plan. But it can work only if all of What's your plan Great! We'll enjoy doing it. you co-operate. Gopi Chacha? 19

Shamu leaves before Sunder and I am going to Murli's house to purchase Chander could ask any question. that goat before he sells it to anybody else. Shamu must be crazy. How could anyone become young by drinking a goat's milk? That was just an ordinary goat. What??? We had fooled Murli by telling him that it After sometime Gopal came rushing gives ten buckets of sweet milk every day. from the other side. Poor chap! I will not let anybody else buy that goat….That goat is mine…That goat is mine. Gopal didn't even stop to talk to Sunder and Chander. 21

What happened to him? He was also After some time Bhola, Raju, Tara, all came talking about the goat. running from another direction. Raju you can't beat me. Whosoever reaches first will buy that magical goat. Something must have happened. Raju was also talking about the magical Shut up! You foolish man!! You made me goat. It seems that goat must have some sell that magical goat to Murli. Let's go magical powers otherwise an intelligent and get our goat back before anyone else person like Raju would not be running for buys it. it. Let's go. Did we make a mistake in giving it away to Murli? 22

Sunder & Chander reach Murli's house. Outside everybody is trying to get hold of the goat. Get away Raju and Gopal; I will not leave the goat. Shamu and Tara you Leave this goat alone. It is pull the rope from your side. mine now. Murli takes back the paper that he had Stop! Everybody!! Leave this goat alone. signed and happily tears it off. It is our goat and we have come to take it back. What can I say Chander? It is after all your goat. You can take it back. Murli you have cheated us by giving your barren land to us. Take back your land and Sunder and Chander take hold of the give us our goat back. goat. 23

Sunder and Chander, you can take the goat In the meantime Gopi Chacha who was back. But let me drink its milk at least once. hiding inside the house comes out. Sunder and Chander were surprised to see that he was still the same old man. Bhola: Yes! Yes! I also want to drink its milk at least once. What's this? You have not become young? As you sow, so shall you reap ! It means that this goat is not magical. We have been cheated. The end..ha...ha...... 24

Now, tell me…. Q.1. Banks do not give loans for the following activity. Mortgaging the house implies (i) for buying tractor, fertilizers & seeds. (i) Land records will show that the bank has interest in the house. (ii) for buying a house (ii) You can sell it or give it as security for another loan without (iii) for education and higher studies informing the bank. (iv) for gambling and drinking (iii) The land ownership documents will be held in the custody of the bank till the loan is repaid. (a) (i)&(ii) (b) (i)&(iii) (c) (i),(ii)&(iii) (d) (iv) (iv) He/She can use the land/house he/she has purchased with Q.2. You need to submit following documents to avail of the bank loan. education loan (a) (i)&(ii) (b) (ii)&(iii) (c) (i),(iii)&(iv) (d) (i),(iii)&(iv) (i) mark sheet of the qualifying exam Q.7. Credit counsellors are not responsible for the following (ii) admission proof activities : (iii) estimate of fees and hostel expenses, etc. (i) Providing advice and information to people who need credit; (iv) identitiy proof (ii) Guiding the borrowers which loan to take, how much to take (a) (i)&(ii) (b) (ii)&(iii) (c) (i),(ii)&(iii) (d) (ii)&(iv) (e) none of the above and how to make the best use of the loan; Q.3. Under Kisan Credit Card, the farmer can draw money : (iii) Helping in completing the formalities of the bank for availing the loan ; (i) to buy seeds, fertilisers and consumption expenses (iv) Serving as recovery agents of the banks. (ii) to dig wells (a) (i)&(ii) (b) (ii)&(iii) (c) (i),(ii)&(iii) (d) (iv) only (iii) to buy tractors, bullocks, implements etc. Q.8. General credit card (GCC) can be held by (iv) to construct a house (a) a farmer (a) (i)&(ii) (b) (ii)&(iii) (c) (i),(ii)&(iii) (d) (iv) (b) a self-employed Q.4. Choose the right one : (c) a student (a) Tractor is mortgaged (d) anybody having a savings bank account (b) Land is hypothecated Q.9. Kisan credit card (KCC) can be held by (c) Scooter is hypothecated and house is mortgaged (a) a farmer Q.5. Choose which is incorrect (b) a self-employed Hypothecation of the tractor means : (c) a student (i) The tractor one has purchased with the bank loan will be in his/her name and possession. (d) anybody having a savings bank account (ii) He/She can use the tractor purchased with the bank loan. Q.10. Raju advised Murli Chacha to go to a bank to avail of loans to buy a land for following reasons: (iii) The bank has the right to recover the amount from the sale of tractor if he/she fails to repay the loan. (i) Cheaper rate of interest; (iv) Only the bank's name will be registered in the books of the (ii) He need not sign a blank document; Road Transport Authority as 'Hypothecated to'. (iii) Not bonded for life to a bank ; (v) He/she can not sell the tractor against which he/she has (iv) formalities and paper work in the interest of the customer; availed the loan without asking the bank. (v) all of the above. (vi) If he/she sells the tractor with bank's permission he/she can use it to meet his expenses and then repay the bank loan. (a) (i)&(ii) (b) (i),(ii)&(iii) (c) (i),(iii)&(iv) (d) (v) (a) (i)&(ii) (b) (i),(ii)&(iii) (c) (iv)&(vi) (d) (iv),(v)&(vi) (e) (vi) only Answers: 1.(d) 2.(c) 3.(d) 4.(c) 5.(e) 6.(c) 7.(d) 8.(d) 9.(a) 10.(d) Q.6. Tick (?) the correct option.

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Raju and the magical goat by rbi

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