Bengaluru: R Ashoka, the leader of the Opposition party in the Legislative Assembly, has accused the Congress government of being inefficient and indifferent to the plight of citizens, particularly in handling cases of financial difficulties and suicides.
Speaking to mediapersons , Ashoka stated that the government is not taking the issue of suicides and financial difficulties seriously, despite 24 deaths reported due to financial difficulties. “Even after the deaths, no one is listening to the pleas of the victims or their families. The government is not taking necessary steps to provide support and assistance to those in dire need.”
He also criticized the government’s response to cases of murder, robbery, and extortion, which are rampant in the state. “From Hubbali to Mandya, there is no rule of law in Karnataka. The state is in a state of chaos, and it’s a shame that the Chief Minister and the Home Minister are not capable of handling the situation.”
Ashoka expressed his concern that the government is more focused on the interests of ministers, MLAs, and bureaucrats who are involved in corrupt practices, rather than addressing the genuine needs of citizens. “Even as people are suffering, the government is not willing to take action to address the issues. It’s a sad state of affairs, and we demand action from the government.”
He also highlighted the need for the government to take concrete steps to address the financial difficulties faced by people, particularly those who are struggling to pay back loans. “We need a comprehensive plan to support those who are struggling financially.
The Harsh Reality of Microfinance: A Growing Crisis in Karnataka
In recent years, microfinance institutions (MFIs) have emerged as crucial players in providing financial support to those in need—particularly among the middle and lower-middle classes. For many, these small loans are a lifeline, enabling them to meet urgent expenses such as medical emergencies, children’s education, and weddings. However, as the pressure to repay these loans mounts, an alarming trend of harassment and oppression has surfaced, leading to despair and, in some tragic cases, death.
Chief Secretary Shalini Rajneesh recently highlighted the serious concerns regarding the harassment faced by borrowers from MFIs. Under her instruction, state authorities have been mandated to take strict measures against oppression and ensure that the established regulations are enforced. The government’s response underscores the severity of the situation: a growing number of individuals—over 24, according to some reports—are reportedly taking their own lives due to the unbearable pressure exerted by aggressive loan recovery practices.
The Burden of Debt
The need for urgent funds often compels individuals to seek out loans from microfinance institutions. These loans are intended for emergencies, but the reality is that many borrowers are not just using them for essential needs. While most borrowers are diligent in repayment, others find themselves caught in a vicious cycle of debt, often due to spending on social obligations or unforeseen expenses. When repayments are delayed, the consequences can be devastating.
Microfinance companies frequently employ aggressive collection tactics, putting immense psychological pressure on borrowers. Families claim they are subjected to constant phone calls, door-to-door visits, and public shaming. In some cases, the loans taken by individuals from these institutions come with exorbitant interest rates that far exceed the limits set by state regulations. Under the Karnataka Prohibition of Excessive Interest Act-2004, for example, a maximum interest rate of 14 percent per annum for secured loans and 16 percent for unsecured loans is mandated. However, some MFIs continue to defy these regulations, pushing vulnerable families deeper into financial distress.
A Gathering Storm
On January 25, Chief Minister Siddaramaiah chaired a crucial meeting attended by key stakeholders, including representatives from the Reserve Bank of India (RBI), heads of microfinance institutions, and state officials. The objective was to address the rampant harassment faced by borrowers and to brainstorm potential solutions to mitigate the crisis. According to Bankers’ Committees and financial experts present at the meeting, the situation is precarious, with abuse of power by some MFIs leading to extreme consequences.
“There is a serious lack of awareness among borrowers regarding their rights,” says a financial advisor who has worked with marginalized communities. “Many people do not understand the terms of their loans, the interest rates involved, or even that they are entitled to detailed documentation regarding their loans.” These gaps in knowledge often result in borrowers being exploited by moneylenders who leverage their financial desperation for personal gain.
The Human Cost
The psychological toll of relentless harassment has manifested in tragic ways. Families have reported incidents of suicide due to the overwhelming stress and despair brought on by unmanageable debt. Many had previously sought assistance from microfinance institutions, believing they were making a responsible choice to improve their economic situation. Instead, they found themselves trapped in a cycle of embarrassment and fear.
An example of this tragic reality is the story of Anita, a 35-year-old mother of three. After her husband lost his job, she took a loan from a local microfinance institution to cover medical expenses for her sick child. Overwhelmed by mounting bills and the pressure to repay her loan, Anita began receiving harassing phone calls daily. The collection agents visited her home, demanding repayments and threatening legal action. In a moment of desperation, Anita took her own life, leaving her children behind to grapple with loss and uncertainty. Tragically, her story is not an isolated incident.
Role of Microfinances
Microfinance is a system of providing loans to the public with an income of up to Rs. 3 lakh. Non-bank cooperative societies, NBFCs, non-government organizations, trusts, small shopkeepers, etc. The supervision of cooperative societies is done by the Department of Cooperatives and the supervision of Non-Banking Financial Institutions (NBFCs) is done by the Reserve Bank of India (RBI).
Micro Finance Industry Network (MFIN) have been designated as self-regulatory organizations by the Reserve Bank of India (RBI). It has been explained that these organizations have been formed to implement prescribed good lending practices.
Only 31 micro finance industries exist in the state of Karnataka. These 31 institutions have obtained membership of the Association of Karnataka Micro Finance Institutions (AKMI). There are 3090 branches of these institutions in the state, with 37,967 staff working. Rs 59,367.76 crore is outstanding in 1,09,88,332 accounts. Reports are submitted to the Reserve Bank of India through supervisory agencies about financial institutions that do not comply with the rules. Appropriate disciplinary action will be taken with the approval of the RBI, it said.
All NBFC-MFIs have been directed to provide information about the interest rate, repayment installment and principal loan to each borrower at the time of loan disbursement in a fact sheet.The following points should be followed in the process of sanctioning and disbursing all loans given by a Micro Finance Institution (MFI), Money Lending Agency or institution.
The borrower should be informed about the terms of the loan in the local language or a language that he understands. The loan application should be informed about the conditions and help in taking the right decision. Appropriate information should be given about which documents are required to be provided. Cash book, ledger and other documents should be maintained properly.
Within 7 days from the date of loan disbursement, a written document should be delivered to the borrower in the prescribed format, clearly stating the loan amount, date and expiry of the period, name and address of the executive of the institution, and the interest rate charged as per the rules. A signed receipt should be given in return for the payment made by the borrower, he said.
A copy of any document related to the loan should be provided on the written request of the borrower. The security obtained from the borrower should be clearly stated. The common people should be aware of these methods. He said that they should take loans after ascertaining their official rights and obligations.
Some individuals, unauthorized moneylenders who capitalize on the needs of the poor, exploit people by giving money for their urgent needs and charging high interest. The public can complain to the helpline numbers against such individuals or institutions. He said that information about violations of rules by microfinance institutions (MFIs), money lending institutions can be reported to the Reserve Bank of India (RBI) helpline number 14448.
The state government has taken steps to provide all kinds of legal protection to microfinance borrowers. The aggrieved persons can contact the state’s unified helpline number: 112 or 1902
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