Siddaramaiah Advocates Enhanced Safeguards Against Microfinance Harassment
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Synopsis
Karnataka CM Siddaramaiah announces immediate effect of the new Ordinance against microfinance harassment, aiming to protect victims and end coercive practices by MFIs.
Key Takeaways
- Immediate enforcement of the Karnataka Microloan Ordinance.
- Victims can lodge complaints with law enforcement.
- Enhanced protection for microfinance loan victims.
- Initiative aims to eradicate coercion by MFIs.
- Governor's approval was crucial for legislation.
Bengaluru, Feb 12 (NationPress) In light of Governor Thaawarchand Gehlot's endorsement of the Ordinance aimed at regulating microfinance institutions (MFIs), Karnataka Chief Minister Siddaramaiah announced on Wednesday that the legislation is effective immediately.
Siddaramaiah declared: “To regulate and curtail the harassment, psychological abuse, and unlawful, inhumane practices executed by microfinance companies, private financial institutions, or individuals under the guise of loan recovery, we have established the Karnataka Microloan and Small Loan (Prohibition of Coercive Measures) Ordinance - 2025, which takes effect immediately as law.”
He further stated that individuals who have experienced harassment after obtaining microfinance loans can lodge complaints with the police, and they will be afforded enhanced protection under this new legislation.
“I am optimistic that this initiative will eradicate harassment and coercion perpetrated by microfinance institutions, financiers, and moneylenders throughout the state,” he expressed.
Previously, the Karnataka Governor sanctioned the ordinance put forth by the Congress-led government to address the Microfinance Institutions' (MFIs) challenge.
The Chief Minister's Office (CMO) confirmed the development, stating that the government forwarded the ordinance concerning microfinance along with the explanation requested by the Governor to Raj Bhavan.
“Now, the Governor has signed the ordinance,” the CMO announced.
With this, the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025 is now in effect.
Initially, the Governor had turned down the ordinance, claiming that the punishment of 10 years and a fine of ₹5 lakh is “excessive.”
The Governor also suggested that the police could have utilized existing laws to manage the situation.
This ordinance may adversely affect microfinance, which, in turn, could impact the poor, according to the Governor.
Importantly, the Congress-led Karnataka government indicated its willingness to incorporate the Governor's suggestions regarding the Ordinance.
The Congress administration had postponed the issuance of the Ordinance to prevent microfinance companies from having the chance to contest the law in court, which could lead to a setback for the government.
Given the ongoing debate surrounding harassment leading to tragic outcomes in the state, the Microfinance Industry Network (MFIN) has taken out advertisements in newspapers featuring the names of registered MFIs overseen by the Reserve Bank of India (RBI).
A growing number of suicide incidents and home abandonments have been reported throughout the state, prompting the state government to enact an Ordinance to regulate the MFIs, which are unregulated by the RBI and operate without licenses.
