Debt relief, HDK's parting gift, may turn 'damp squib'

The Karnataka Debt Relief Act, which promises to waive all private borrowings, is likely to end up as a damp squib given the challenges involved in its implementation.

Former chief minister H D Kumaraswamy had hailed the passage of the law, which received Presidential assent in July, as his “parting gift.”

But while the Pawnbrokers and Jewellers Association, Karnataka, has approached the court challenging the law, lack of clarity on whether it is applicable to licensed or unlicensed money-lenders, or both, has compounded the problem.

Officials estimate that debtors owe Rs 850-900 crore to pawnbrokers, which will be waived if the Act “passed in haste” is implemented.

Speaking to DH, Mrudul M Vaishnav of the Association said that Karnataka High Court has issued an order preventing creditors from submitting their debt data to assistant commissioners, who are the nodal officers under the scheme. Due to the order, creditors can submit their details only after October 15, whereas the last date for submitting details was October 22.

“The Association has also questioned how the Act was applicable to them when Non-Banking Financial Companies (NBFC) who operate on the same model and levy the same rate of interest were exempt from the Act,” he said.

According to Cooperation Department data, there are a total of 5,810 registered moneylenders in Karnataka, 8,314 pawnbrokers and 8,797 financial institutions registered and regulated under Karnataka Money Lenders Act, 1961.

Panduranga Garag, Joint Registrar of Co-operative Societies (Legal Cell), said that the high court order prevented officials from taking any coercive action to implement the Act. Noting the curbs imposed by the court, he said that creditors loans would be waived of after submitting the required data as per the Act.” Assistant Commissioners will hear the cases and dispose them within a year,” he said.

However, sources in the Department said that the announcement made in July before Kumaraswamy stepped down was for “mere publicity” and was unlikely to be realised.

“Registered pawnbrokers have approached the court as they would receive nothing for the loans they have advanced. Not many people who have taken loans from unregistered money lenders will come forward fearing retribution,” sources said.

Meanwhile, there are also complaints that touts are approaching debtors and promising them to ensure that their loans are waived for a price. But officials say beneficiaries should refrain from approaching touts as the implementation of the Act still remains far-fetched.