BENGALURU: Karnataka governor Thaawar Chand Gehlot has rejected the ordinance sent in by Congress govt to curb harassment of borrowers by microfinance institutions, citing concerns over severity of punishment and potential impact on the microfinance sector.
Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance, 2025, sought to impose strict penalties, including a 10-year jail and Rs 5 lakh fine for violations.The governor, however, deemed these provisions “excessive” and suggested that police could enforce existing laws to address the issue.
While law minister HK Patil said they would “re-request” the governor to approve the ordinance as it has been drafted keeping the interest of borrowers in mind, a senior law officer hinted at reworking the ordinance, accommodating changes suggested by the governor.
With the ordinance back on drawing board, state govt faces the challenge of balancing borrower protection and viability of microfinance industry. Law department officials said this should happen within the next week and before the budget session starting in early March.
According to the CMO, Gehlot raised concerns that the ordinance could negatively impact microfinance, which plays a crucial role in providing credit to poor. Karnataka govt had drafted the ordinance in response to a spate of suicides linked to coercive-recovery tactics by microfinance firms.
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