Karnataka government takes tough stance on microfinance harassment

In a decisive move to address growing complaints about microfinance harassment in the state, Chief Minister Siddaramaiah has announced immediate legal measures to protect borrowers.

Following an emergency meeting with ministers, officials from various departments, RBI, NABARD, and microfinance institutions, the CM assured that strict action will be taken to curb unlawful practices.

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"We are drafting a new law to safeguard loan seekers. No loans will be allowed without proper licensing. Violators will face legal action," Siddaramaiah said. He outlined plans to introduce an ordinance modeled after similar laws in other states, like Andhra Pradesh, to regulate microfinance operations.

Key measures include banning loan collections after 5 PM, prohibiting the involvement of rowdies or goons in recovery processes, and mandating compliance with RBI's interest rate guidelines. A district-level helpline will also be set up for borrowers to file complaints, which police will investigate promptly.

"Charging interest beyond legal limits and harassing borrowers is unacceptable. If recovery is conducted through force, threats, or public humiliation, the police will register complaints and take immediate legal action," the CM added.

The government is committed to protecting borrowers while ensuring legitimate lending practices. The ordinance, expected to be implemented soon, aims to create a fair and transparent environment for microfinance operations in Karnataka.