BENGALURU: The Karnataka government’s decision to introduce a One-Time Settlement (OTS) scheme to waive interest on loans taken by beneficiaries of the Karnataka Minorities Development Corporation (KMDC) has triggered sharp criticism, with opposition parties calling it another example of minority appeasement at the cost of the state exchequer.
Under the proposed scheme, the government plans to allow 1.94 lakh beneficiaries who borrowed from KMDC between 2013-14 and 2018-19 to repay only the principal, completely exempting them from interest payments. The total loan amount involved is Rs 800.59 crore, out of which only Rs 98.18 crore has been recovered so far. A staggering Rs 714.13 crore remains unpaid.
Despite strong reservations expressed by the Finance Department, the Minority Welfare Department has forwarded the proposal to the state cabinet for approval. The issue is expected to be discussed in the cabinet meeting scheduled for this evening.
Massive financial burden on the state
According to official documents, the KMDC had extended loans under multiple schemes,s including education, Arivu, Shram Shakti, small business loans, animal husbandry, land purchase, silk loans, craft loans, self-employment and housing.
Between 2013 and 2019
• 1,07,832 beneficiaries received loans worth Rs 441.47 crore under the Arivu scheme.
• 63,775 beneficiaries got Rs 159.43 crore under Shram Shakti
• 3,316 people availed Rs 66.31 crore under small loans
• 13,187 individuals were given Rs 39.22 crore under self-employment schemes
• Several crores were distributed under housing, land purchase, silk and craft loan schemes
However, recovery has been extremely poor. In many categories, not a single rupee has been recovered. For example:
• Under the farmers’ scheme, Rs 69.50 lakh was disbursed, but zero recovery has been made.
• For land purchase loans, Rs 8.13 crore was given, and nothing has been repaid.
• Housing loans worth Rs 10.23 crore have also seen no repayments at all.
Overall, only 12 per cent of the total loan amount has been recovered in the last several years, raising serious questions about financial discipline and accountability.
The Finance Department warned against the move
Internal cabinet notes accessed by the media reveal that the Finance Department had initially cautioned that approving such an OTS scheme would set a dangerous precedent. It warned that if interest is waived for minority corporation beneficiaries, other state corporations would also demand similar concessions, leading to a financial crisis.
The Finance Department reportedly observed: “Granting blanket interest waiver in one corporation will become a precedent for all other corporations and will severely impact government revenue.”
Yet, despite these objections, the Minority Welfare Department has pushed ahead with the proposal, citing beneficiaries’ inability to repay loans due to financial difficulties.
Opposition calls it vote-bank politics
Opposition leaders have strongly condemned the move, accusing the Siddaramaiah government of using public money to appease a particular community ahead of elections.
BJP leaders argue that thousands of farmers, small entrepreneurs, and middle-class borrowers from other communities are struggling to repay bank loans, yet no such relief is being offered to them.
“This government is selectively helping only one section of society while ignoring the majority of taxpayers. Waiving interest worth hundreds of crores is nothing but political appeasement,” a senior BJP leader alleged.
What the government claims
The KMDC has justified the proposal by claiming that if the OTS scheme is implemented, at least Rs 150 crore can be recovered from defaulters. It estimates that about Rs 14 crore in interest will have to be written off, but argues that recovering the principal amount is better than allowing the loans to remain completely unpaid. Minority Welfare Minister B.Z. Zameer Ahmed Khan has reportedly approved the proposal and recommended cabinet clearance.
