Governor Rejects Karnataka's Microfinance Ordinance Over Harsh Penalties

Governor Thaawarchand Gehlot has rejected the Karnataka government's proposed Micro Finance Ordinance, citing excessive punishment and potential negative impacts on the poor. The ordinance was drafted to protect borrowers from coercive actions by microfinance institutions, following multiple complaints and a rise in suicides related to predatory loan recovery methods.

Governor Thaawarchand Gehlot has vetoed the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025. Proposed by the Congress-led government under Chief Minister Siddaramaiah, the ordinance aimed to regulate the microfinance sector and protect borrowers from coercive practices.

The Chief Minister's Office (CMO) noted that Gehlot found the penalty measures, which included a 10-year prison sentence and a Rs 5 lakh fine, excessively harsh. The Governor suggested existing laws were sufficient to manage the situation.

Gehlot expressed concern that the ordinance might adversely affect microfinance operations, ultimately harming poor borrowers. In response to increasing borrower suicides and complaints, the government had sought to impose stricter penalties to curb predatory loan recovery methods utilizing an ordinance.

(With inputs from agencies.)