Ordinance to curb microfinance menace delayed

Anticipated Ordinance to regulate money lenders and microfinance institutions during loan recovery to be finalized soon.

The much-anticipated Ordinance to curb the menace of money lenders and microfinance institutions during loan recovery is expected to be promulgated over the next couple of days.

While it was widely expected that the State Cabinet, which met here on Thursday, would finalise the draft before sending it to the Governor, a decision could not be arrived at either in the Cabinet meeting or the meeting of the group of Ministers with Chief Minister Siddaramaiah later in the day.

Government sources said the inter-departmental officials’ meeting would continue on Friday, and in all likelihood, the draft would be finalised by Saturday. “The meeting with the Chief Minister after the Cabinet meeting also remained incomplete. The draft needs to be finetuned to ensure that it does not hit any legal hurdle,” sources said, adding that the draft over the last few days has changed nearly half a dozen times. Sources also said the aim was to protect the Ordinance from any legal challenge since there were other laws already.

Law and Parliamentary Affairs Minister H.K. Patil also indicated during his post-Cabinet briefing that the Cabinet’s discussion of the Bill was inconclusive, which is why the Chief Minister convened a separate meeting in the evening. When asked if an economic crisis in rural areas had led to loan defaults, the Minister said he would be able to answer once the Bill was ready after discussion.

The government’s move for legislation comes in the wake of widespread problems being reported about the harassment of borrowers by microfinance institutions, suicides and people leaving their villages.

A note from the Chief Minister’s Office after the meeting said it had been decided to strengthen the draft of the Ordinance by reviewing it again. A team of officials from the Finance Ministry and the Law Ministry has been formed to review the Bill, it said, adding that the Bill must adhere to the law and should not have any loopholes. He pointed out that strong legislation is being envisaged to protect borrowers from the atrocities committed during loan recovery.

Mr. Siddaramaiah said the police would get more powers under the proposed legislation, and Ombudsmen would be appointed besides making forcible recovery a non-bailable offence and rigorous imprisonment. He also said the legislation will have strict action against those unregistered lenders who harass borrowers. Though the present legislations provide opportunities to act against microfinance institutions harassing borrowers, it is not being implemented properly. The police should act suo moto instead of waiting for the complainants to be filed, the notes added.