Govt to bring strict laws to regulate microfinance firms: K'taka Home Min

The Karnataka government is contemplating bringing in stringent laws to rein in microfinance companies, state Home Minister G Parameshwara said on Friday.

With reports emerging from various parts of the state about people dying by suicide due to the "atrocities" of loan recovery agents, Chief Minister Siddaramaiah has convened a meeting to address the issue, he said.

"Across the state, many people have been complaining that they are in trouble due to these microfinance companies. It has come to our notice that there are shortcomings in the existing laws," Parameshwara told reporters.

He noted that while there are provisions in the law to recover money, there are also laws to protect borrowers.

"There are several reports from our department highlighting the inadequacies in the existing laws. If stricter regulations are required, the government will introduce them," Parameshwara said.

He added that the government has instructed microfinance companies to stop harassing borrowers.

According to Parameshwara, borrowers are required to give undertakings when taking loans, but banks often make them sign multiple documents without explaining the purpose, leaving borrowers unaware of what they are agreeing to.

"Microfinance companies pester people and seize properties. We need to find a legal solution to address this," he said.

He further noted that Law and Parliamentary Affairs Minister H K Patil has brought the issue to their attention, and even CM Siddaramaiah has spoken about it.

"The chief minister has convened a meeting to discuss the issue. We will examine weaknesses in the law and review specific cases," the home minister explained.

JD(S) leader and Union Minister H D Kumaraswamy criticised the government for failing to address the menace of microfinance companies harassing people.

"Is there even a Home Minister in Karnataka?" he remarked.

Speaking to reporters, he urged the Karnataka government to take decisive action against the growing menace of microfinance institutions exploiting poor and middle-class citizens.

Kumaraswamy stated that district officials or deputy commissioners alone cannot handle the issue.

"The government must make strict decisions to address this problem," he said.

He recalled that during his tenure as Karnataka CM in 2018, he had introduced the debt-free bill to protect citizens from predatory financial schemes. "But after my government ended, the Act was discarded. I am deeply disappointed," he said.