Law soon to stop harassment by microlenders in Karnataka

Chief Minister Siddaramaiah announced this decision after a high-level meeting with representatives from microfinance companies and RBI officials
Karnataka CM Siddaramaiah
Karnataka CM Siddaramaiah
Updated on
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BENGALURU: Taking note of incidents of alleged harassment by microfinance companies, the state government on Saturday decided to enact a stringent law soon through an ordinance to safeguard the interests of genuine borrowers.

Chief Minister Siddaramaiah announced this decision after a high-level meeting with representatives from microfinance companies and RBI officials. Law and Parliamentary Affairs Minister HK Patil, Deputy Chief Minister DK Shivakumar, Home Minister Dr G Parameshwara and Revenue Minister Krishna Byre Gowda attended the meeting.

Siddaramaiah told reporters that the new law will protect the interests of borrowers. The government will study the law enacted by Andhra Pradesh to control microfinance companies and other lenders.

“The Union government has prepared a draft to ban unregulated lending. Consultations will be held in this regard and action will be taken to protect people, especially farmers, who have fallen into the debt trap. The Union government will be urged to enact effective laws to rein in microfinance companies and other lenders,” the CM said.

“The RBI has given permission to charge up to 17.07% interest on loans. However, some finance companies charge between 20 and 28% interest on loans. Similarly, three loans should be given to a family. But this norm is being violated by disbursing 4 to 5 loans,” he said.

Stating that nobody could lend money without a licence, the CM said helplines will be set up at deputy commissioners’ offices across the state, where complaints can be filed.

“Existing money lending laws will be amended and a new one enacted. Views of office-bearers of the microfinance companies’ association and RBI officials will be obtained. We don’t say don’t lend, we don’t say don’t recover. But borrowers should not be harassed. The government will step in to protect the interests of borrowers,” Siddaramaiah said.

He said the RBI guidelines on loan recovery should be followed. Lenders should not go for loan recovery after 5pm. Outsourcing of loan recovery through agents, especially rowdies and goons, will not be allowed. Police will take suo motu action and file FIRs.

“We have instructed the police department to file complaints or take up suo motu cases if lenders recover loans through rowdies or goons, or if it is done in a disrespectful manner,” he said.

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