Kautilya priced loans by risk tiers in the Arthashastra

Lenders financing trade in the Mauryan Empire faced wildly different levels of risk depending on what kind of venture they were funding — a loan for ordinary local commerce on established roads carried little chance of total loss, while a loan backing a merchant caravan through forest tracts, or a voyage by sea, carried a real chance the borrower, the goods and the loan itself would simply vanish.

Leaving interest rates to informal negotiation between lender and borrower risked both unfair outcomes, a lender exploiting a desperate borrower, and systemic instability, lenders refusing to finance genuinely valuable but risky ventures like sea trade because no negotiated rate reliably compensated for the risk. The state needed a public, predictable schedule that priced risk explicitly rather than leaving it to case-by-case bargaining.

Codified risk-tiered interest rates into law, scaling the rate with documented risk category so safe loans stayed cheap and risky ventures still got funded.

Tiered rates let safe borrowers pay less, avoiding subsidy of riskier loans.

Higher legal rates for risky ventures kept lenders willing to fund them.

Public schedule prevented exploitation and made fair rates predictable.

Legal caps with fines ensured lenders stuck to the schedule.

When one price can't fit different risk levels, publish a tiered schedule that scales price with documented risk category.

The tiered schedule gave lenders a legally sanctioned, risk-adjusted return for financing genuinely riskier ventures like sea trade, while capping what could be charged on safer, everyday commercial lending — a codified risk-based pricing structure roughly 2,300 years before the term 'actuarial science' existed.