The Karnataka government is set to draft a new bill to address concerns over the activities of microfinance firms operating in the state. Law Minister HK Patil, speaking after a cabinet meeting on Friday, stated that the Reserve Bank of India (RBI) and other central finance agencies have been unable to effectively regulate these firms, prompting the state to step in with its own legislation.
The proposed bill aims to establish stricter guidelines and ensure greater accountability in the sector, addressing complaints of exorbitant interest rates and aggressive recovery practices often associated with microfinance institutions.
Minister Patil emphasized the growing need to protect borrowers, especially those from economically weaker sections, from exploitation. He added that the bill would focus on creating a fair and transparent framework for lending and recovery practices.
This move comes amid increasing concerns over the impact of unregulated microfinance activities on rural and low-income communities. The state government is expected to consult stakeholders before finalizing the provisions of the legislation.