The state government will soon introduce a stringent law to curb harassment by microfinance institutions, chief minister Siddaramaiah said on Thursday.
Chairing a high-level meeting in Krishna, official residence of the chief minister, to address public grievances against microfinance firms, Siddaramaiah directed officials to strengthen legal provisions to protect borrowers from coercive recovery methods.
“It was decided that the (existing) ordinance we have issued to regulate microfinance institutions will be thoroughly reviewed, and a more robust law will be implemented at the earliest,” he said. He added that a senior team from the law and finance departments would be constituted to ensure the law’s swift enforcement.
The chief minister also emphasised that the law must be “completely constitutional and free of any loopholes.” He pointed out that borrowers frequently face harassment from aggressive loan recovery agents, which necessitates urgent intervention.
“Our goal is to ensure that loan recovery does not turn into a nightmare for borrowers. The new law will grant police more authority to take immediate action against coercive recovery tactics,” he said. He also announced that ombudsmen would be appointed to oversee complaints and ensure fair treatment for borrowers.
To deter unethical practices, Siddaramaiah warned that microfinance firms engaging in inhumane recovery practices would face severe consequences. “Non-bailable cases will be filed against those resorting to forceful recoveries, and strict penalties, including imprisonment and heavy fines, will be imposed,” he said.
“A stringent legal framework will be enforced to curb harassment by unregistered moneylenders. We will not allow financial exploitation of vulnerable citizens,” the CM asserted.
Siddaramaiah further questioned the officials about why existing laws against microfinance harassment were not being effectively implemented. “Current laws provide enough provisions to act against microfinance-related harassment. Police should not wait for formal complaints—they must register suo motu cases against violators,” he directed.
The meeting concluded with a resolve to fast-track the legal process and ensure borrowers are shielded from undue pressure and exploitation by microfinance institutions.
The urgency behind the ordinance is underscored by a series of recent deaths allegedly linked to microfinance loan recovery practices. In Halaguru village, a 59-year-old woman attempted suicide on Tuesday as she was allegedly struggling to repay a mortgage loan of ₹6 lakh taken in 2018. Initially making regular payments, her financial situation deteriorated due to the ill health of her husband and son, ultimately leading to default, police said.
Under mounting stress and after losing her house, the woman attempting suicide after informing her daughter of her actions, police said, adding that she was rushed to Mandya Institute of Medical Sciences, where she is currently undergoing treatment. The Halaguru police have registered a case and initiated an investigation.
Two separate suicide cases were reported on Sunday. In Ambale village, a 53-year-old woman engaged in farming and dairy activities allegedly took her own life after failing to cope with mounting debt. Having borrowed over ₹5 lakh from multiple microfinance firms, she was struggling to keep up with monthly payments of ₹20,000.
Police said that the recent death of a cow she had purchased through a fresh loan further exacerbated her financial woes. Her family alleged that constant pressure from lenders led her to take the extreme step. Authorities registered a case at the Nanjangud Rural police station, with district superintendent of police Vishnuvardhan confirming an ongoing investigation.
In another incident, a 46-year-old government school teacher from Honnali town, Davanagere district, reportedly ended her life due to harassment from private finance companies. The teacher, who had taken loans from a Shivamogga-based microfinance firm and other informal lenders to build a house, was facing persistent repayment pressures. About 20 days prior, the lender had lodged a complaint at the Honnali police station, prompting police mediation and assurance from the company. However, the financial strain persisted.
HT tried to get reaction but no one responded.