Karnataka Governor Rejects Microfinance Ordinance
BENGALURU: Karnataka Governor Thaawar Chand Gehlot has turned down the ordinance proposed by the Congress government aimed at protecting borrowers from the aggressive practices of microfinance institutions. The Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance, 2025, intended to enforce stringent penalties, including a decade-long imprisonment and a fine of ₹5 lakh for violations.
The governor expressed that these penalties were “excessive” and recommended that law enforcement agencies utilize existing legislation to tackle the issue. Law Minister HK Patil indicated that the government would “re-request” the governor’s approval, emphasizing that the ordinance was crafted with borrowers’ interests at heart. A senior law officer hinted at the possibility of revising the ordinance to incorporate the governor’s suggestions.
Balancing Borrower Protection and Microfinance Viability
With the ordinance now back to the drawing board, the state government faces the critical task of balancing the protection of borrowers while ensuring the sustainability of the microfinance sector. Officials from the law department are expected to expedite this process before the budget session begins in early March.
The governor raised concerns that the ordinance could adversely affect the microfinance industry, which plays a vital role in providing credit to economically disadvantaged communities. This initiative was rooted in response to alarming incidents of suicides linked to coercive recovery tactics employed by microfinance firms.
As the Karnataka government navigates this complex landscape, it remains crucial to implement solutions that safeguard borrowers without compromising the essential services offered by microfinance institutions. For the latest offers and financial services, visit Looffers.com to discover how you can make informed financial decisions.
