Tamil Nadu Money Lending Bill 2025: Microfinance Industry Concerns
Why in the news
Tamil Nadu brought a bill to stop harsh loan recovery methods, shielding farmers, women and self-help groups, but microfinance lenders warn it may hurt their operations.
Key facts
- Bill: Tamil Nadu Money Lending Entities (Prevention of Coercive Actions) Bill, 2025.
- Proposes a three-year jail term for coercive recovery.
- Microfinance companies barred from forcibly collecting dues.
- Disputes to go to district-level committees.
Industry response
- Small finance banks and NBFCs fear the many checks could badly affect microlending; one senior bank executive said the environment is not conducive.
- Regular collection prevents NPAs in risky low-income lending.
- Regular home visits are seen as vital to manage risk; restrictions could weaken loan management.
| Lender in Tamil Nadu | Share of AUM |
|---|---|
| Muthoot Microfinance | 25% |
| CreditAccess Grameen | 20% |
| Asirvad MFI | 20% |
| Ujjivan Small Finance Bank | 14% |
Other states
- Karnataka brought an ordinance in February with similar measures: up to 10 years’ imprisonment and ₹5 lakh fines.
Exam angle
- Jail term in the Tamil Nadu bill: three years.