Bengaluru: Following Governor Thaawarchand Gehlot’s approving the Ordinance promulgated to contain microfinancing institutions (MFIs), Karnataka Chief Minister Siddaramaiah stated on Wednesday that the law comes into effect with immediate effect.
Siddaramaiah announced: “To regulate and restrict the harassment, mental abuse, and unlawful, inhumane actions committed by microfinance companies, private financial institutions, or individuals under the pretext of loan recovery, we have enacted the Karnataka Microloan and Small Loan (Prohibition of Coercive Measures) Ordinance – 2025, which comes into effect immediately as law.”
He added that those who have faced harassment after taking microfinance loans can file complaints with the police, and they will receive greater protection under this new law.
“I am confident that this initiative will put an end to harassment and coercion by microfinance institutions, financiers, and moneylenders in the state,” he said.
Earlier, the Karnataka Governor approved the ordinance promulgated by the Congress-led government to tackle the Microfinancing Institutions’ (MFIs) menace.
Confirming the development, the Chief Minister’s Office (CMO) said that the government had sent the ordinance related to microfinance along with the explanation requested by the Governor to Raj Bhavan.
“Now, the Governor has signed the ordinance,” CMO said.
With this, the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025 will come into effect.
Earlier, the Governor had rejected the ordinance, stating that the punishment of 10 years and a fine of Rs 5 lakh is “excessive.”
The Governor had also suggested that the police could have used existing laws to control the situation.
This ordinance is likely to negatively impact microfinance, which in turn, will affect the poor, the Governor said.
Notably, the Congress-led Karnataka government then had said that it was ready to incorporate suggestions made by the Governor in connection with the Ordinance.
The Congress government had delayed the issuance of the Ordinance to ensure that microfinance companies do not get an opportunity to challenge the law in court, which could result in a setback for the government.
Considering the debate surrounding harassment leading to disastrous consequences in the state, the Microfinance Industry Network (MFIN) issued advertisements prominently in newspapers publishing the names of the registered MFIs regulated by the Reserve Bank of India (RBI).
A series of incidents of suicides and desertion of homes are being reported from across the state, following which the state government promulgated an Ordinance to regulate the MFIs, which are not regulated by the RBI and operate without licenses.
(IANS)
