High interest rates keep Tamil film industry on edge

CHENNAI: The self-immolation of four family members, including two kids, at the Tirunelveli collectorate on Monday has brought back focus on usury and its effects on the borrowers in the state.

The practice of exacting high interest rates is prevalent across class structures and the stakes are higher when it comes to the Tamil film industry. In May 2003, G

Venkateswaran

had ended his life, unable to pay back a high-interest loan that he had taken for his film ‘Chokka Thangam’.

Though people in the industry say that usury is no longer all pervasive, the issue does surface every now and then. Earlier this year, the first copy producer of the Vijay Sethupathi- starrer ‘Puriyatha Puthir’ lodged a police complaint against a financier for putting undue pressure.

"The high cost borrowings have come down largely in the past few years, more so because not many financiers are willing to back small budget films. ‘Negative’ finance helps producers to get up to 50% of their project cost. But, it is available only for saleable stars like from Ajith, Vijay, Siva Karthikeyan and Vijay Sethupathi," says a former producer, whose production house has had hits before, but is nowhere in the picture now. "For others, financing takes place only based on the immovable assets. Big financiers like Madurai Anbu too have restricted to backing films produced by people, whom they know personally," he said. While interest rates range between 36% and 48%, an established production house like Sathya Jyothi Films was able to get finance at an interest rate of 18% to 24% for Ajith’s ‘Vivegam’.

Founder-director of BOFTA Film Institute G Dhananjayan, says unsecured loans are always expensive in all industries. "What safety net is available for financiers in such deals? In case of a housing loan, the bank has a property on which to base its recovery mode. But, there is no guarantee for a financier in the film industry," he asks. "When a film is not released, the financier has to bear the losses. That could be a reason, why most of them insist on high interest rates. While the industry needs to get organised, it is high time we also address the financiers as investors and not usurers," he adds.

A change was seen in the early 2000s, when banks began financing films, but the uncertainty of the industry meant banks too withdrew support. "Banking finance took off in a big way some years ago, with

IDBI

at the forefront. Initially, they were able to recover 100% money with interest, since the loans were given on the condition that the account would be settled prior to the film’s release, it worked well," says L Suresh of

Ananda Pictures

, an industry veteran, who was part of the advisory committee for banks. But after some time the advisory committee was disbanded and films were permitted to release, without settlement, in the hope of higher returns. "With 90% of films turning out to be flops in the past 30 years, that was a big risk. And banks lost a lot of money," Suresh pointed out.