Microfinance Crisis: Karnataka CM Pledges to Safeguard Borrowers' Rights
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Synopsis
Karnataka's Chief Minister Siddaramaiah has committed to protecting borrowers from microfinance institutions. He announced new legal measures to prevent harassment and ensure compliance with RBI regulations during a high-level meeting. The government aims to create awareness and strengthen existing laws to aid those in debt.
Key Takeaways
- Karnataka CM emphasizes borrower protection.
- New ordinances will combat harassment.
- Police will be empowered to enforce laws.
- Public awareness meetings will be held.
- RBI guidelines on loans will be strictly followed.
Bengaluru, Jan 25 (NationPress) Karnataka's Chief Minister Siddaramaiah convened a significant meeting on Saturday to address the challenges faced by citizens due to microfinance institutions.
In a press briefing at Vidhana Soudha, Siddaramaiah affirmed the government's dedication to safeguarding the rights of borrowers engaged with microfinance entities.
He stated that stringent legal actions would be initiated against any harassment of borrowers. A new law will soon be enacted via an ordinance aimed at protecting the interests of these borrowers, the CM mentioned.
Criminal charges will be brought against those involved in coercive loan recovery practices. The legislation will also facilitate the filing of voluntary complaints, he indicated.
Measures will be implemented to enhance existing regulations, including empowering the police further. The proposed law will encompass regulations for unregistered money lenders, as stated by CM Siddaramaiah.
The CM made it clear that coercive and threatening practices for loan recovery will not be tolerated. He pledged that the government will take all essential actions to defend the interests of impoverished borrowers.
He urged individuals facing harassment from microfinance agents to report these incidents to local law enforcement. District officials, including Deputy Commissioners and District Police Superintendents, will organize community awareness meetings and issue alerts to microfinance agents.
All Deputy Commissioners and Police Superintendents have received firm directives. They must set up complaint helplines in every district office, where grievances can be lodged. Police are mandated to register complaints proactively, he emphasized.
The Central Government is drafting legislation to ban unregulated lending activities. Extensive consultations will be conducted to protect individuals ensnared in the debt trap and to urge the Central Government to implement suitable laws against harassment.
The RBI has established various guidelines for loan recovery, which include prohibitions on home visits for recovery after 5 p.m., the use of threats, and the involvement of third parties in recovery processes. Violators will face legal repercussions, he warned.
The RBI has set limits on the loan amounts that can be granted to a single household. Actions will be taken to ensure adherence to this limit and to enforce these guidelines effectively, he stated.
During the meeting addressing microfinance concerns, CM Siddaramaiah posed critical questions to leaders of registered and licensed microfinance firms, demanding answers.
He inquired, What measures have you implemented to prevent your employees from engaging in illegal recovery practices? What actions have been taken against such staff? CM Siddaramaiah further questioned.
He also asked, Before seizing a borrower's property, did you obtain court permission? Who authorized your staff to act beyond the law? Are you employing goons for loan recovery?
Additionally, the CM questioned whether the Reserve Bank of India (RBI) terms and conditions were communicated to borrowers in their native language.
Are you breaching RBI rules by offering loans beyond permitted limits? Why do you repeatedly lend to the same borrowers without evaluating their repayment ability?
Why aren’t you completing Aadhaar-based KYC verification before loan disbursement? If KYC procedures were properly executed, the issue of recurrent lending to the same borrowers could have been resolved, CM Siddaramaiah admonished microfinance company representatives.
The companies noted that institutions lacking an RBI license are engaging in such activities.
The Chief Minister held the meeting at his official residence, Krishna, to review the functioning and effects of microfinance institutions in the state.
Attendees included Deputy Chief Minister D.K. Shivakumar, Home Minister G. Parameshwara, Law Minister H.K. Patil, Revenue Minister Krishna Byre Gowda, the Chief Minister's Political Secretary Govindaraju, Chief Secretary to the Government Shalini Rajneesh, Additional Chief Secretary Atique Ahmed, State Police Chief Alok Mohan, and senior officials from various departments.
