Karnataka passes four Bills to curb predatory money-lending; penalties include 10-year jail

The first Bill introduces a penalty for coercive action by microfinance institutions operating in the state, while mandating transparency in the rates of interest charged by such institutions, moneylenders or an organisation of lenders. The penalty for those violating the provisions of the Bill will be imprisonment for up to 10 years and a fine of up to Rs 5 lakh.

The remaining three Bills aim to protect “economically vulnerable groups and individuals from the undue hardship” caused by “usurious interest rates and coercive means of recovery by licensed lenders and unlicensed money lenders”. The amendments introduced to these Bills enhance the penalties imposed for violations of regulations, aligning them with the first Bill.

Speaking during the discussion on the Bills, Law and Parliamentary Affairs Minister H K Patil said that transactions by microfinance institutions and moneylenders amounted to Rs 40,000 crore in the state. “This money is black money,” he said, adding that it was being used to rake in large profits and eventually to secure political power.