Karnataka: Setback for microfinance ordinance as governor seeks clarifications

In a setback for the Karnataka government, Governor Thawar Chand Gehlot has returned the Microfinance Ordinance without signing it, citing concerns over its provisions. The ordinance, aimed at curbing harassment by microfinance institutions, now faces uncertainty.

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The Governor has raised key questions regarding fines and punishments outlined in the ordinance. He questioned why the focus was solely on borrowers, asking whether lenders should also be considered for legal protection. Additionally, he pointed out inconsistencies in penalties, noting that microfinance loans typically do not exceed ₹3 lakh, yet fines of up to ₹5 lakh and prison sentences of 10 years have been proposed for harassment cases.

With the ordinance returned, the government now faces the challenge of addressing these concerns. Despite warnings and legal measures, harassment by microfinance institutions continues in the state, adding to the administration’s troubles. The government must now decide whether to amend the ordinance and resubmit it for approval or table it for discussion in the next legislative session.

The rejection is seen as a political and administrative setback for the Siddaramaiah-led government, which had positioned the ordinance as a crucial step in protecting borrowers from predatory lending practices. The coming days will determine whether the government can provide satisfactory clarifications and push the ordinance forward once again.