Karnataka Governor rejects microfinance ordinance proposed by Siddaramaiah govt

Karnataka Chief Minister Siddaramaiah. (File photo/PTI)

Governor Thaawarchand Gehlot on Friday rejected Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025 that the Siddaramaiah-led Congress government had proposed to regulate microfinance.

According to the Chief Minister's Office (CMO), the governor cited several reasons for his rejection.

Gehlot felt that the punishment of 10 years and fine of Rs 5 lakh proposed by the Karnataka government is excessive, said the CMO.

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 Rs 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.

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.