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Amid suicides, Karnataka clears 'tough' law to go after NBFCs

The Karnataka cabinet has approved an ordinance imposing non-bailable charges on microfinance and non-banking financial companies that engage in harsh loan recovery practices. This measure aims to curb harassment and suicides linked to aggressive loan recovery. Police will have increased authority to file cases against offending firms, and an ombudsman will be established to oversee these issues.

BENGALURU: The Karnataka cabinet Thursday approved an ordinance which imposes non-bailable charges on microfinance companies and non-banking financial companies that engage in "inhumane" loan recovery practices. The ordinance will be sent to governor Thaawar Chand Gehlot for approval, with plans to replace it with a formal law in the budget session in March. A series of incidents of suicide and harassment have been reported across the state due to the alleged harassment by microfinance companies.

Chief minister Siddaramaiah, after a cabinet meeting, said govt intends to give police more powers to prevent harassment of loan defaulters. "We will install an ombudsman. The govt will ensure those who treat people inhumanely and force them to repay loans will be charged under non-bailable sections," he said.

Police will have powers to file suo motu cases against microfinance firms even before borrowers lodge a formal complaint..