New hope for borrowers as state regulates microfinance sharks; 10 years’ jail for offenders

“If microfinance institutions force people to repay loans or harass them without reason, the guilty will be sentenced to 10 years in prison,” Deputy Commissioner C. Sathyabham has warned.

Speaking at a press conference at the District Collector’s office on Thursday, she said the state government has implemented a new law from February 12, 2025, wherein the government itself will appoint ombudsmen in each district to implement the law.

She said they will act as a bridge between borrowers and lenders.

“Three or four meetings have already been held with the microfinance officers and staff in the district. They should register their financial institutions with the government within 30 days. The entire management of the institutions will be done at the District Collector level. If anyone is harassing them for loan repayment, the public should contact the ombudsman directly,” she said.

“People get money without worrying about high interest rates because they think these loans come easily. They should be careful about whatever comes easily as it comes with a high price, often hidden. Lenders should also move forward after knowing the condition of the person and the terms of loan repayment.  According to the new law, lenders cannot obtain any documents from the public in return for loans. Transparency in interest rates should be maintained. All business agreements should be in Kannada. Every month, when the loan installment is paid, a receipt with details of the remaining principal, interest and installments should be given without fail,” the DC said.

SP Mohammed Sujitha said all lower-level police personnel are now empowered to register FIRs regarding microfinance harassment. She said that if people complained of such harassment, strict action will be taken against the offenders.

She added that already, one FIR had been registered in the district regarding microfinance harassment.

“No complaints have been received after the implementation of the new law. Earlier, complaints were received about harassment for loan repayment in Konanur, Arakalgudu, and Dodda Aladahalli in Hassan, and police officers visited the spot and resolved the problem.  Lenders and borrowers should be careful henceforth,” she added.

The District Collector also said that there have been many cases of suicide in the state due to microfinance harassment.

“No one should take a hasty decision like suicide. Whatever the problem, it should be brought to the attention of the district administration. One should not hope to get money easily and then get into trouble,” she cautioned.