Karnataka Chief Minister Siddaramaiah on Saturday said the state government would amend the existing laws related to the money lending business and introduce new legislation to protect the interest of genuine borrowers. In the wake of public outrage against the alleged harassment by microfinance companies to recover money from borrowers, Siddaramaiah chaired an emergency meeting with his deputy D K Shivakumar, Revenue Minister Krishna Byre Gowda, Home Minister G Parameshwara, Law Minister H K Patil, senior government and top police officials.
Representatives of the microfinance companies association, regional officers of the Reserve Bank of India and NABARD officials were also present.
Later, briefing reporters, the CM said he took the opinion of the microfinance companies as well as the RBI officials.
“After taking their view, we told them that we won’t say not to give loans or do not recover money from borrowers, but while recovering money you should not torture and harass people,” Siddaramaiah said.
While recovering money, RBI guidelines should be followed by microfinance institutions. The central bank should also monitor the violations of these guidelines, he added.
“We are going to amend the existing laws and also bring new legislation to protect the interest of the genuine borrowers of the microfinance institution and other private money lenders,” he added.
The chief minister added he told the companies not to charge interest more than the prescribed rules.
“After 5 PM, no one should go to recover money. We have opposed outsourcing the recovery work,” he said.
“What happens is, it is outsourced and rowdies are roped in. This should not be done. We will take stringent action against violation of rules for recovering money,” Siddaramaiah warned.
No one should do money lending business without a licence, he said.
The CM also announced setting up a helpline number in each district where people can lodge their complaints.
Police will take action on its own, if there are violations of the rules, regulations and law. Whoever uses force, employs rowdies and humiliates to recover money will face police action, he said.
The new law will be introduced soon with the help of law, finance, home and revenue departments.
After discussing with other states such as Andhra Pradesh where a law has been promulgated, we will bring in the new law, Siddaramaiah said.
Further, the state will appeal to the Centre to make a law to prevent harassment of borrowers because it comes under the RBI and they regulate them.
“I saw an illustration which shows that no one can charge more than 17.07 per cent but the microfinance companies are collecting 20 per cent to 28 per cent. There is no control over them. They are collecting more than the RBI limit,” the CM said.
RBI guidelines say that microfinance companies should not give loans of more than Rs 3,000, but they are giving loans up to Rs 8,000, he added.
“I have warned the microfinance companies and the RBI officials that if they do not regulate properly, the state government will step in. Even now, there is scope for police to register a case against the microfinance companies,” Siddaramaiah said.
The outstanding amount is Rs 59,367.76 crore. The number of outstanding accounts is Rs 1,09,88,332, which is 15 per cent of the state. There are 31 microfinance institutions operating in the state, which have employed 37,967 employees. These firms have 3,090 branches all over Karnataka, he said.
To a question, Siddaramaiah said, “We will not stop the business of microfinance companies because loans cannot be availed only from banks. That’s the reason that non-banking money lending business started. We will regulate them.”
The chief minister said seven cases have been registered against the microfinance companies.
When asked about what action would be taken against the microfinance companies, Deputy Chief Minister D K Shivakumar said, “We have called the Director General of Police Alok Mohan to put these microfinance operators behind the bar by the evening”.
The meeting was convened after many people died by suicide, families fled their homes and women staged protests against the torturous microfinance companies across the state.
The menace is more prevalent in the rural areas.
