Siddaramaiah instructs DCs, SPs to take steps to close all illegal MFIs

Karnataka CM orders crackdown on illegal microfinance institutions exploiting the poor with high interest rates, ensuring protection for vulnerable groups.

Karnataka Chief Minister Siddaramaiah on Saturday instructed Deputy Commissioners and Superintendents of Police of all districts to take steps to shut down all illegal and unregistered microfinance institutions (MFIs) that are exploiting the poor by charging exorbitant rates of interest on loans.

The Chief Minister held a videoconference with DCs and SPs and sternly told them to take steps to implement the Ordinance promulgated by the government in this regard and put a break on hiring rowdies and agents for recovery of loans by illegal MFIs in the State.

The Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025, aims at cracking the whip on unregistered and unlicensed MFIs that employ coercive means to recover loans given to poor people.

Mr. Siddaramaiah told officials to take steps towards regulating the actions of unregulated/unregistered MFIs and moneylending agencies or organisations, thereby, protecting and relieving economically vulnerable groups and individuals from the undue hardship of usurious interest rates and coercive means of recovery.

The licensed MFIs have to grant loans as per the guidelines issued by the RBI. He told officials to register criminal cases if any MFIs were found involved in the forcible recovery of loans from the poor. After the implementation of the Ordinance, cases of harassment and exploitation from the MFIs have come down, the Chief Minister said.

Law and Parliamentary Affairs Minister H.K. Patil and senior officials attended the meeting.