CM warns against using rowdies for loan recovery

Bengaluru: Chief Minister Siddaramaiah issued a stern warning against the use of rowdy elements and goons for loan recovery. He emphasized that finance companies must not outsource loan recovery responsibilities. Any violations will lead to strict action, including registering cases against the offenders. Siddaramaiah delivered this message during a press conference held after a meeting with Deputy Chief Minister DK Shivakumar, Home Minister Dr. G Parameshwara, and senior officials at the CM’s residence, Krishna.

The CM stated that he had sought opinions from the Microfinance Association and RBI officials on the matter. While acknowledging that the government cannot prevent lending, he underlined that harassment during loan recovery is unacceptable. He instructed finance institutions to adhere strictly to RBI guidelines.

Siddaramaiah specified that loan recovery activities must not be conducted after 5 PM. Microfinance companies and pawnshops must operate within the framework of the law. The CM warned that any legal violations would result in uncompromising action. The CM announced plans to introduce a new law via an ordinance to address the harassment faced by borrowers. The proposed law will be formulated after reviewing similar regulations in neighboring states. He assured that steps would be taken in coordination with the Law, Home, and Revenue Departments to tackle unauthorized lending practices. If borrowers are harassed, cases will be registered immediately, and action will follow.

Siddaramaiah reminded microfinance companies that they are governed by RBI regulations, which cap interest rates at 17.07%. He noted that some companies were charging exorbitant rates of up to 28–29%, exploiting borrowers. The government plans to inform the Central Government about these violations and take stringent action against such companies.

Deputy Chief Minister DK Shivakumar assured prompt action against cases of harassment by microfinance companies. He instructed officials to arrest offenders by evening and directed the Director General and Inspector General of Police to ensure strict compliance.

Karnataka has witnessed a surge in harassment by microfinance companies, leading to suicides and forcing some borrowers to flee their hometowns. Districts like Chikkamagaluru, Ramanagara, Raichur, Belagavi, and Mangaluru have reported increasing cases of microfinance excesses. In response, the high-level meeting chaired by Siddaramaiah has introduced several critical decisions and issued strict guidelines for microfinance institutions. The meeting at Krishna, the Chief Minister’s residence, was attended by DCM DK Shivakumar, Home Minister Dr. G Parameshwara, Revenue Minister Krishna Byre Gowda, Law Minister HK Patil, Karnataka Director General of Police Alok Mohan, and Additional Chief Secretary LK Atheek. The government’s decisions aim to curb microfinance-related harassment and ensure borrowers’ safety and dignity across Karnataka.