Karnataka Government to Reform Money Lending Laws Amid Microfinance Controversies

Karnataka's CM Siddaramaiah announced plans to amend laws on money lending to safeguard borrowers from microfinance harassment. An emergency meeting with government officials and RBI representatives underscored the issue's urgency. Proposed changes include stringent recovery rules, monitoring by the RBI, and limiting outsourcing of recovery tasks.


Devdiscourse News Desk | Bengaluru | Updated: 25-01-2025 14:59 IST | Created: 25-01-2025 14:41 IST
Karnataka Government to Reform Money Lending Laws Amid Microfinance Controversies
Siddaramaiah Image Credit: ANI
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Karnataka Chief Minister Siddaramaiah has declared the state's intention to reform existing money lending laws to shield borrowers from the unlawful tactics of microfinance companies. An emergency session featuring top state officials, microfinance representatives, and RBI personnel was held to address the public's growing outrage.

During this meeting, discussions revolved around adherence to RBI guidelines when recovering loans, with a clear emphasis on preventing harassment and abuse of borrowers. The Chief Minister firmly conveyed that while loan recovery is necessary, it should not involve intimidation or coercion, and must remain within legal bounds.

Amendments to current laws and the introduction of new legislation are in the works to bolster borrower protection, particularly against excessive interest rates and outsourced recovery teams using aggressive tactics. The move comes after reports of borrower suicides and family displacements due to relentless pressure from microfinance entities, primarily affecting rural Karnataka.

(With inputs from agencies.)

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