Karnataka Governor approves microfinance ordinance after government resubmission​on February 12, 2025 at 2:07 pm

Karnataka Governor approves microfinance ordinance after government resubmission

​Karnataka Governor approves microfinance ordinance after government resubmission Karnataka Governor approves microfinance ordinance after government resubmission   

Karnataka Governor Thaawarchand Gehlot has given his assent to the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025, which seeks to curb harassment by microfinance companies against borrowers. Government sources confirmed the development on Wednesday.

The ordinance, which proposes stringent penal provisions, including a jail term of up to 10 years and a fine of up to Rs 5 lakh for microfinance executives found using coercive recovery tactics, was initially returned by the Governor on February 8.

He has now urged the government to table the bill in the next legislative session for further discussion and potential legislative approval.

He had expressed concerns over the severity of punishments and the potential negative impact on the microfinance sector. Gehlot noted that the law, in its original form, could cause an injustice to lenders and suggested that existing laws might suffice to address such cases.

Following mounting reports of borrowers facing extreme harassment, leading to suicides, absconding, and torture at the hands of recovery agents, the Karnataka government stood firm on the ordinance.

On February 10, the ordinance was resubmitted after addressing the Governor’s concerns. While the specifics of the changes, if any, remain unclear, sources indicate that the government maintained its stance on strict penalties.

The ordinance follows remarks from Karnataka Deputy Chief Minister DK Shivakumar, who had vowed strict action against coercive recovery methods. “The government will empower the police to handle these situations more effectively. We won’t allow microfinance companies to take the law into their own hands,” Shivakumar stated earlier from his residence in Sadashivanagar.

Home Minister G Parameshwara had also affirmed the government’s commitment to addressing the Governor’s concerns, ensuring that the ordinance aligns with the objective of protecting vulnerable borrowers while considering the broader financial ecosystem.