Bengaluru: Governor Thaawar Chand Gehlot on Wednesday gave his assent to the Karnataka Microfinance (Prevention of Coercive Actions) Ordinance, 2025, aimed at curbing harassment of borrowers by microfinance lenders. The ordinance, which introduces stringent penal provisions, was notified immediately after the Governor’s approval.
With the ordinance now in force, the govt is all set to introduce a bill in the legislature next month to secure full legal backing for it.
The law has provisions for jail term up to 10 years and fines up to Rs 5 lakh for violators.
After giving his assent, Gehlot urged the govt to table the bill in the upcoming session of the legislature for a comprehensive debate to address concerns regarding the stringent penal provisions of the ordinance.
“The govt is ready with the draft bill, as it intends to enact the new law as early as mid-March. The ordinance will be in force until then,” an official at the department of parliamentary affairs said.
The ordinance was initially sent to the Governor on Feb 4, but was sent back by him on Feb 7, citing his objections to some of the clauses. The primary concern was that the proposed 10-year prison term and Rs 5 lakh fine were too stiff and that the existing laws could be used to regulate microfinance institutions.
The Governor had also warned that the law could stifle credit sources for the poor and negatively impact self-help groups that rely heavily on microfinance. He urged the state govt to ensure fairness and protect the interests of both, borrowers as well as lenders.
Despite these reservations, the govt stood its ground and resent the ordinance to the Governor on Feb 10, clarifying the doubts raised by him, without initiating any modifications.
The govt has assured that the bill will be debated in both Houses of the legislature before its enactment.
The ordinance, which will remain valid for six months, was promulgated despite the upcoming budget session being less than a month away. The govt’s urgency stemmed from the increasing number of complaints regarding harsh loan recovery tactics and the resulting suicides by many borrowers.