BENGALURU: The revised draft of the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance, 2025, sent for Governor Thaawarchand Gehlot’s approval on Monday, includes longer punishment for violation of the law. It has been increased from three years to a maximum of 10 years. The expert committee headed by Law and Parliamentary Affairs Minister HK Patil decided to increase it, and it is expected that the governor will give his approval for the ordinance on Tuesday, official sources informed TNIE.
The Siddaramaiah cabinet had decided to promulgate an ordinance to protect and provide relief to economically vulnerable groups and individuals, especially farmers, women and women’s self-help groups, from undue hardship of usurious interest rates and coercive means of recovery by Micro Finance Institutions, money lending agencies or organisations operating in the state.
The highlights of the stringent law are
Any person who contravenes Section 8 of the ordinance shall be tried and is punishable by the Judicial Magistrate First Class, with imprisonment for a term not less than six months and which may extend to 10 years, and a fine which may extend to Rs 5 lakh. Offences under this ordinance are cognizable and non-bailable.
MFIs shall not use any coercive action themselves or through agents for recovery of money from the borrower. Any form of coercive recovery shall be liable for punishment under the provisions of the ordinance, and the registering authority can suspend or cancel registration of such MFIs.
It will be considered an offence to exert pressure, obstruct or use violence, or insult or intimidate the borrower or his/her family members; persistently follow the borrower or family members; interfere with any property owned by the borrower, deprive them of the property, or hinder them from using it; frequent the house or place where the borrower resides or works, or carries on business; use private or external agencies to negotiate with the borrower to make payment, using coercion and undue influence.
Besides, seeking to forcibly take any document from the borrower which entitles the borrower to benefits under any government programme is also an offence. A complaint can be filed regarding violation of the provision of this ordinance by a Micro Finance Institution (MFI), money lending agency or organization, before the jurisdictional police station and police officer.
No police officer shall refuse to register a case; a police officer not below the rank of DySP shall be empowered to file a suo motu case.
The government may by notification, appoint an ombudsperson who can act as mediator between the borrower or lender, for settling the dispute.
Every loan advanced before commencement of this section, including the amount of interest, if any, payable by the borrower to MFIs which are unlicensed and unregistered shall be deemed to be wholly discharged.
No civil court shall entertain any suit or proceeding against the borrower for recovery of any amount of such loan, including interest. MFIs or money lending agencies which fail to submit quarterly and annual statements shall be punishable with imprisonment for a period of six months or a fine which may extend to Rs 10,000 or both.