Karnataka Governor Greenlights Ordinance to Combat Microfinance Issues
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Synopsis
Karnataka Governor Thaawarchand Gehlot has approved an ordinance from the Congress-led government aimed at addressing the issues caused by Microfinancing Institutions (MFIs). The ordinance aims to regulate MFIs and prevent coercive actions against borrowers.
Key Takeaways
- Karnataka Governor approved the ordinance on MFIs.
- Ordinance aims to prevent coercive actions by MFIs.
- Previous rejection cited excessive penalties.
- Government prepared to incorporate suggestions from the Governor.
- Microfinance practices could be adversely affected.
Bengaluru, Feb 12 (NationPress) Karnataka Governor Thaawarchand Gehlot has on Wednesday authorized the ordinance put forth by the Congress-led administration to address the challenges posed by Microfinancing Institutions (MFIs).
The Chief Minister's Office (CMO) confirmed this development, stating that the government had forwarded the ordinance regarding microfinance along with the requested clarification to Raj Bhavan.
Now, the CMO has announced, the Governor has officially signed the ordinance.
This means that the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025 will soon be in effect. Details on this matter are yet to be disclosed officially. Nonetheless, it remains to be seen how effective this law will be in addressing the microfinance challenges.
Previously, the Governor had declined the ordinance, arguing that the penalties of 10 years in prison and a fine of Rs 5 lakh were too severe.
The Governor had also indicated that law enforcement could have leveraged existing laws to manage the situation.
This ordinance could have adverse effects on microfinance practices, subsequently impacting the economically disadvantaged, according to the Governor.
Interestingly, the Congress-led Karnataka government expressed its willingness to integrate suggestions made by the Governor concerning the ordinance.
The Congress administration had postponed the issuance of the ordinance to prevent microfinance companies from challenging the law in court, which could pose a setback for the government.
In light of the ongoing dialogue about harassment leading to tragic outcomes in the state, the Microfinance Industry Network (MFIN) has taken out advertisements in various newspapers showcasing the names of registered MFIs under the regulation of the Reserve Bank of India (RBI).
A series of reported incidents involving suicides and families abandoning their homes have emerged statewide, prompting the government to introduce an ordinance to govern MFIs operating without RBI oversight or necessary licenses.
