CM Siddaramaiah govt on mat as unauthorised microfin firms run free in Karnataka

As harassment cases from microfinance companies rise in Malavalli taluk, local MLA PM Narendraswamy warned against charging exorbitant interest rates, urging stricter actions against such practices.
Chief Minister Siddaramaiah arrives for a cabinet meeting at Vidhana Soudha 
in Bengaluru on Friday
Chief Minister Siddaramaiah arrives for a cabinet meeting at Vidhana Soudha in Bengaluru on Friday Photo | Nagaraja Gadekal
Updated on
3 min read

MYSURU: Chikkadevamma (49) cooks for her husband and son, takes a tiffin carrier for herself and reaches a nearby estate for work. Her running nose and chilly weather do not bother her or stop her from going to work, as on Saturday, she has to pay Rs 1,766 to a self-help group (SHG) that had lent Rs 1 lakh loan to her daughter.

Any delay in weekly payments will put her in trouble as SHG representatives will sit in front of her house till the money is paid. Rather than face that embarrassment, it is better for her to work non-stop. She is not worried about the steep 30% interest she has to pay. For 93,000 she borrowed, she must pay an interest of Rs 40,720 interest. She had no option, but to borrow from the SHG in the border village of Heggadevanakote.

She is not alone as villagers are bombarded with offers for loans from representatives from over half-a-dozen microfinance companies that offer loans within an hour. All that villagers have to do is produce a copy of their Aadhaar. But these easy loan schemes soon turn into deep debt traps as these companies run their operation like a mafia. This has forced many villagers to flee from their villages.

Jothi (name changed) of Chatra village said they lived a quiet life as labourers. But soon, they were deep in trouble because of the loan trap they fell into. They had to flee from their village to settle down near Pandavapura.

A farmer in Bidarakatti village in Mandya had borrowed Rs 1.5 lakh from a bank and taken a hand loan of Rs 7 lakh from financiers. Unable to repay after he lost his crop and suffered a loss in his piggery business, he committed suicide.

At Vadeyandahalli in T Narasipur taluk women recently knocked on the door of the tahsildar, accusing microfinance companies of pushing them to suicide, and not giving them enough time to repay loans.

As cases of families leaving towns because of harassment from microfinance companies have increased in Malavalli taluk, local MLA PM Narendraswamy warned microfinance companies against collecting exorbitant interest rates. Villagers, who borrow for the education of their children and other pressing reasons, are forced to pay an exorbitant 24% interest rate, he said.

Though a few districts have opened helplines against such harassment, increased migration and suicides across the state have turned out to be a challenge for the Siddaramaiah government.

Though many admitted in private that they get easy loans from microfinance companies to meet their immediate needs and to carry out farming activities, high interest rates have pushed them into trouble. “Why would we go to microfinance companies if cooperative societies and banks give loans to the farming community,” asked Prasad, a farmer.

He said that many financiers from neighbouring states too are operating in Karnataka and have hired goons to threaten families. Banks are not responding to farmers nor are societies meeting their needs, he said, and ridiculed that nationalised banks look at Cibil scores of farmers.

The Karnataka Rajya Raitha Sangha has planned to lay siege to the RBI to protest against the 58% reduction in interest-free loans given by NABARD to farmers. KRRS state president Badagalapura Nagendra said the government should take corrective steps and stop harassment from microfinance companies. He said they will distribute five lakh pamphlets and will put up boards educating people against microfinance companies and high interest rates charged by them.

Govt failed to instil confidence, says HDK

Union minister HD Kumaraswamy said that though many families are leaving villages fearing harassment from microfinance companies, the government has failed to instill confidence among people. He said that only 14 out of 60 such companies are legal in Mandya district and stressed the need for strict action.

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