Karnataka microfin ordinance sent to governor, proposes up to 10-year jail for violation

Aimed at protecting borrowers from harassment by microfinance institutions (MFIs), the Karnataka government has drafted an ordinance, with penal provisions, including a jail term up to ten years, and fine as high as ₹five lakh for violation.

Confirming this, State Home Minister G Parameshwara on Tuesday said, the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025 has been sent to Governor Thaawarchand Gehlot for his assent.

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"It was three years (in initial draft), now we have increased it. Fine has also been increased to five lakh. This is to ensure that the heat of the law is felt (by violators). If a law is made with perfunctoriness just like that, such incidents won't stop. Hence, the fine (amount) and imprisonment (period) has been increased, so that it in a way, becomes a deterrent," Parameshwara said, responding to a question about punishment being increased to ten years imprisonment.

Speaking to reporters here, he said, "The Governor was out of town, and once he is back he may give an assent after looking at it."

The government decided on promulgating the ordinance, in response to a spate of suicides and multiple complaints from various parts of the state against predatory loan recovery methods by microfinance firms.

Responding to a question, the home minister said, after the first draft of the ordinance was prepared, it was discussed in the government about MFI going to court against it, and the chief minister had instructed the Law department to take all the necessary precautions in this regard.

"This caused a slight delay. Now keeping everything in mind, a draft has now been prepared...," he added.

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