Will tackle microfinance menace with ordinance, new law, amendments: CM

NT Correspondent

Bengaluru: Chief Minister Siddaramaiah announced that an ordinance would promulgate an ordinance, a fresh law would be passed and existing ones would be amended to tackle harassment by micro-finance institutions in some parts of the state. The CM made the disclosure to mediapersons after chairing a high-level, emergency meeting with Deputy CM DK Shivakumar, Revenue Minister Krishna Byre Gowda, Home Minister G Parameshwara, Law Minister H K Patil, top government and police officials.

The meeting was also attended by a microfinance companies association, regional officers of the Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) officials. Siddaramaiah said that the State government may consider fresh legislation to address the issue as well. He said that unregistered micro-finance companies had been violating rules. He added that lending loans at 17.07 per cent interest was lawful under RBI rules some institutions had been charging an exorbitant 21 to 29 per cent.

He said that it is illegal for them to hand out more than three loans to a single family but that rule is also being violated. “There are a number of unregistered companies. That is where the problem lies. This is why we’re going to bring forth a new law to rein in unregistered financial institutions,” Siddaramaiah said. “We’ll make a new law only with an interest to give protection to the interest of the borrowers, that is to say genuine borrowers.

Moreover, one cannot engage in money lending without license,” he added. However, Siddaramaiah assured that lawful micro-finance operations would not be affected. “After taking their (micro-finance institutions’) view, we told them we won't forbid you to issue loans or say do not recover money from borrowers but while recovering money you should not torture and harass people,” he said.

Rowdies involved: Siddu The CM said that recovery of loans by hooligans was also an issue, adding that approaching defaulters after 5 pm would be made illegal. “After 5 PM, none should try to recover money. We are opposing outsourcing of the recovery work as well,” he added. “Many times, recovery is outsourced and rowdies are deployed. This will not do. We’ll take strict action against violation of rules for recovery of borrowed money,” Siddaramaiah warned.

Fleeing villagers cause alarm

Reports surfaced in the second week of January that hundreds of families had fled their villages in Chamarajanagar district. The reason the people cited was harassment and abuse of defaulters and people who had failed to make monthly installments by micro-finance institutions.

Residents of Heggavadipura village in the district alleged that institutions had been lending money at an exorbitant 24 per cent interest rate. Siddaramaiah said that so far four people have committed suicide due to harassment of micro-finance institutions, adding that seven cases have been booked. The State government has come under sharp criticism from the Opposition BJP and JD(S), who have alleged that the ruling Congress had a lax attitude on the issue.