A crucial meeting held on Saturday to discuss and draft an Ordinance to curb the excesses of microfinance institutions has proposed to create an online portal to track and update all details on loans.
Revenue Minister Krishna Byre Gowda, Law and Parliamentary Affairs Minister H.K. Patil, and top officials from various departments attended the meeting.
Sources said the meeting proposed that the online portal should track and update details on loan disbursements, ensuring transparency, and preventing over-lending that traps the poor in debt cycles. The entire loan application and disbursement process should be managed online.
Participants of the meeting proposed that the ordinance should ensure that interest rates charged by the microfinance companies should be transparent and in compliance with the RBI regulations.
“The Ministers instructed the officials to incorporate key aspects proposed at the meeting into the legal framework. The new law will make registration mandatory for microfinance companies in the State. The government should have the discretion to cancel or suspend the registration at any time if the companies are found to violate the law. An ombudsman, including Additional Deputy Commissioners and Assistant Commissioners, should be appointed in each district to oversee microfinance operations,” sources said.
The new law should also ensure that the microfinance companies are not allowed to take any assets or valuables as collateral for loans. There should be strict restrictions against using intermediaries to harass borrowers who default on repayments, sources added.
Following a slew of complaints about microfinance company representatives harassing borrowers, the Karnataka government had announced that it would come out with an Ordinance to put in place stringent guidelines.
Published – February 01, 2025 09:01 pm IST