Karnataka cabinet to implement strict law to protect borrowers from microfinance companies

The draft Ordinance has penal provisions such as six months to three years of imprisonment for officials of unregistered microfinance companies if found guilty of harassing borrowers.
Chief Minister Siddaramaiah arrives for the cabinet meeting in Vidhana Soudha on Thursday.
Chief Minister Siddaramaiah arrives for the cabinet meeting in Vidhana Soudha on Thursday.(Photo | Nagaraja Gadekal, EPS)
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BENGALURU: The state cabinet on Thursday decided to bring in a stringent law through an Ordinance soon to protect borrowers from the alleged harassment by microfinance companies.

The cabinet, which held a detailed discussion on the draft Ordinance, favoured imprisonment of officials of errant microfinance firms, besides imposing penalties for allegedly harassing the borrowers.

After the cabinet meeting, Siddaramaiah chaired a high-level meeting with Law and Parliamentary Affairs Minister HK Patil, Home Minister G Parameshawara, Cooperation Minister KN Rajanna, Social Welfare Minister HC Mahadevappa, Chief Secretary Shalini Rajaneesh, ACS LK Atheik and other officials.

They discussed the problems faced by borrowers, especially farmers. Increasing suicide cases involving borrowers and the alleged ill-treatment of women by officials of lending companies were also discussed. According to sources, the draft Ordinance has penal provisions such as six months to three years of imprisonment for officials of unregistered microfinance companies if found guilty of harassing borrowers.

The cabinet decided to review the draft Ordinance and implement a stringent law at the earliest. A team of senior officials from the Law and Finance departments has been formed for the purpose. “The new law should not have any loopholes. It should aim at preventing lenders from harassing borrowers,” Siddaramaiah told the officials.

The new law will accord more powers to the police to initiate swift action. An ombudsman will be appointed.

“Those forcibly recovering loans from borrowers should be punished and fined.

Non-bailable cases should be filed against them,” Siddaramaiah said. “There are provisions in existing laws to prevent harassment of borrowers by microfinance companies. Why are they not being implemented properly? Police should register suo motu cases against errant lending firms without waiting for complaints to be filed,” he said.

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