Govt approves OTS scheme for KMDC loans

Bengaluru: The Karnataka government’s decision to approve an ‘One Time Settlement’ (OTS) scheme waiving interest on loans issued by the Karnataka Minorities Development Corporation (KMDC) has triggered a major political controversy in the state.

The Cabinet recently gave its nod to the proposal to waive interest on loans extended between 2013–14 and 2018–19. Under the scheme, beneficiaries will be required to repay only the principal amount, while the accumulated interest will be completely written off.

According to official data, KMDC had disbursed loans amounting to Rs 981 crore during the period. However, only Rs 98.18 crore has been recovered so far, leaving an outstanding balance of Rs 714.13 crore. The new OTS scheme is expected to benefit around 1.94 lakh borrowers.

Defending the move, a senior KMDC official said, “If the scheme is implemented effectively, we expect to recover at least Rs 150 crore. Recovering the principal amount is better than allowing the entire dues to remain unpaid.”

However, the decision has drawn sharp criticism from opposition parties, especially the BJP, which has accused the Congress-led state government of indulging in “minority appeasement politics.”

BJP MLC C.T. Ravi questioned the rationale behind the scheme and asked, “Why is the government offering such benefits only to minorities? Why are similar concessions not being extended to beneficiaries of Ambedkar Development Corporation, Valmiki Corporation and other backward class welfare corporations?”

Former Chief Minister and current MP Basavaraj Bommai also slammed the government, saying, “Instead of addressing the financial problems of farmers and other struggling communities, the state government is focusing only on vote-bank politics.”

Sources in the Finance Department revealed that the department had opposed the OTS proposal, warning that it could set a wrong precedent. “If interest waiver is granted in one corporation, similar demands will arise from other corporations, which will put a huge burden on the state exchequer,” an official said.

Despite the objections, the Minorities Development Corporation has justified the decision, arguing that recovering at least part of the dues is more practical. “Even if around Rs 14 crore interest is waived, getting back the principal amount will help the corporation in the long run,” a KMDC representative explained.

The issue has now turned into a major political flashpoint, with the opposition accusing Chief Minister Siddaramaiah and Minister Zameer Ahmed Khan of favoring a particular community.