Governor Thaawarchand Gehlot on Friday rejected the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025, which was proposed by the Siddaramaiah-led Congress government to regulate microfinance practices.
As per the Chief Minister's Office (CMO), the governor outlined multiple reasons for his decision to reject the ordinance.
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Gehlot felt that the punishment of 10 years and fine of ₹5 lakh proposed by the Karnataka government is excessive, said the CMO according to news agency PTI.
He was also of the opinion that the existing laws could have been used by the police department to control the situation, added the CMO.
As per CMO, the other reason given by the governor is that the ordinance is likely to have a negative impact on microfinance and this will ultimately affect the poor.
Aimed at protecting borrowers from harassment by microfinance institutions (MFIs), the Karnataka government drafted the ordinance with penal provisions, including a jail term up to 10 years, and fine of ₹five lakh for violation.
On February 4, Home Minister G Parameshwara told reporters that initially it was kept at three years but the government increased it to 10 years to ensure that the heat of the law is felt by the violators.
{{/usCountry}}On February 4, Home Minister G Parameshwara told reporters that initially it was kept at three years but the government increased it to 10 years to ensure that the heat of the law is felt by the violators.
{{/usCountry}}"It was three years (in initial draft), now we have increased it. Fine has also been increased to five lakh. This is to ensure that the heat of the law is felt (by violators). If a law is made with perfunctoriness just like that, such incidents won't stop. Hence, the fine (amount) and imprisonment (period) has been increased, so that it in a way, becomes a deterrent," Parameshwara said, responding to a question about punishment being increased to ten years imprisonment.
The government decided on promulgating the ordinance, in response to a spate of suicides and multiple complaints from various parts of the state against predatory loan recovery methods used by microfinance firms.
(With PTI inputs)
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