Governor Thaawarchand Gehlot has approved a new rule in Karnataka called the Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025. This rule helps stop illegal and forceful ways of collecting loans from people. The Governor agreed with the state government after they gave strong answers to some questions he had about the ordinance.
The government made this rule because there have been reports of people taking extreme actions, like committing suicide, due to pressure from agents who work for small loan companies. Some of these lenders, which may or may not have licenses, even hired tough guys to recover money by force.
According to the new rule, anyone working for these small loan companies who uses threats to get money can face a fine of up to five lakhs and up to ten years in jail. The rule requires these companies to register with district authorities within a month after the law is announced and to be clear about how much interest they charge on loans.
Recently, the risk of loans becoming unpaid has jumped from 1.5% to 6%, which is very high compared to the recommended 2%. This means many people are borrowing carelessly and may not be able to pay it back. Despite these issues, micro-finance institutions (MFIs) remain important for helping those who don’t have access to regular banks.
Leave a Reply