Rural indebtedness rising due to unregulated microfinance institutions: Brinda Karat

Veteran CPI(M) leader Brinda Karat on Friday (December 19, 2025) lashed out at the Bharatiya Janata Party Government, alleging that rural indebtedness particularly among women was on the rise due to the lack of effective control over the high interest rates charged by microfinance institutions (MFIs).

Leading a demonstration in front of Regional Office of the Reserve Bank of India here, Ms. Karat said, “public sector banks are giving loans to MFIs at low interest rate. They are jacking up the interest without any cap on interest rate. The SHGs and individual women are taking loan at very high rate of interest.”

“Moreover, MFIs are encouraging disbandment of SHGs as individual women are more vulnerable. They prefer to extend loan to individual woman at exorbitant interest rate. The RBI has not put any cap on interest rate. These are new Mahajans of Vikshit Bharat,” said the CPI (M) leader.

“It is not microfinance, but a micro-loot. We had done a survey of about 700 women of different districts of Odisha. And we have seen, it (rural indebtedness) is just tip of the iceberg what is happening on Ground. All India Democratic Women’s Association (AIDWA) has done survey of 10,000 women across India,” she pointed out

“Advasis and Dalits have big population in Odisha. The Self Help Groups used to get some benefits from earlier government in Odisha. Now, that has been removed by present government. RBI has become just an instrument for implementing government policies. Autonomy of RBI has disappeared as far as MFIs’ operation is concerned,” Ms Karat pointed out.

The AIDWA members have demonstrated across the country. The women’s organization had carried out detail survey which showed alarming rise in indebtedness among poor and especially women due to the unchecked functioning of MFIs and NBFCs.

“Women today are compelled to take loans not for entrepreneurial growth, but for basic survival needs food, healthcare, children’s education, housing repairs, repayment of earlier loans, and coping with livelihood loss after COVID-19. As primary managers of household survival and unpaid care work, women absorb the economic shocks caused by unemployment, migration, illness, and inadequate public services. Debt has thus become a substitute for state support,” AIDWA says.

A survey of 9,000 women borrowers across 26 States and 100 districts, including 563 women from six districts of Odisha, was undertaken by AIDWA.

“The survey reveals that women borrowers who availed loans from non-public sector institutions face severe harassment, coercive recovery practices, loss of property, displacement, and in some cases, suicide, as a result of exploitative debt traps,” members said.

AIDWA demanded, “public sector banks should provide loans to Self-Help Groups (SHGs) at zero percent interest, with a dedicated SHG lending mechanism in every branch. District and block level grievance redressal cells should be established to address complaints of harassment, coercive recovery, and unfair practices by MFIs and NBFCs, with special focus on women borrowers.”

Ensure a dedicated service counter/session for SHG women in every public sector bank branch, operating on all working days, so that their banking and credit related needs are processed smoothly, efficiently, and without discrimination.

“The interest rates on micro loans must not exceed 12%, and that excessive fines and penalties imposed during the COVID period should be refunded or waived. Lending by commercial banks to NBFCs and MFIs should not be classified under the Priority Sector Lending (PSL) Scheme,” AIDWA further demanded.