Rural indebtedness rising due to unregulated microfinance institutions: Brinda Karat

Senior CPI(M) leader Brinda Karat on Friday, December 19, 2025, lashed out at the Bharatiya Janata Party Government and alleged that rural indebtedness, especially among women, has increased due to lack of effective control over high interest rates charged by microfinance institutions (MFIs).

Organizing a demonstration in front of the Regional Office of the Reserve Bank of India here, Ms. Karat said, “Public sector banks are giving loans to MFIs at low interest rates. They are increasing the rates with no interest ceiling. SHGs and individual women are taking loans at very high interest rates.”

“Also, MFIs are promoting disbandment of SHGs as individual women are more vulnerable. They prefer to give loans to individual women at exorbitant interest rate. The RBI has not put any upper limit on the interest rate. These are the new Mahajans of Vikshit Bharat,” the CPI (M) leader said.

“This is not microfinance, it is microplunder. We did a survey of around 700 women in different districts of Odisha. And we found that what is happening on the ground (rural indebtedness) is just the tip of the iceberg. The All India Democratic Women’s Association (AIDWA) surveyed 10,000 women across India,” she said.

“Adwasis and Dalits have a large population in Odisha. Self-Help Groups were getting some benefits from the earlier government in Odisha. Now this has been abolished by the present government. The RBI has become merely a tool to implement government policies. The autonomy of the RBI has disappeared as far as the operation of MFIs is concerned,” said Ms. Karat.

AIDWA members demonstrated across the country. The women’s organization had conducted a detailed study that revealed an alarming rise in indebtedness among the poor, especially women, due to uncontrolled functioning of MFIs and NBFCs.

“Today, women are forced to take out loans not for entrepreneurial growth, but for basic survival needs: food, healthcare, child education, housing repairs, repayment of previous loans, and to cope with loss of livelihood post-COVID-19. As primary managers of household survival and unpaid care work, women absorb economic shocks caused by unemployment, migration, disease, and inadequate public services. Debt is therefore a substitute for government support,” says AIDWA.

A survey was conducted by AIDWA with the participation of 9,000 women borrowers from 26 States and 100 districts, including 563 women from six districts of Odisha.

“The survey reveals that female borrowers who take out loans from non-public sector organizations face serious 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 at zero percent interest to Self Help Groups (SHGs) with a dedicated SHG lending mechanism at each branch. Grievance redressal cells should be set up at the district and block level to address complaints of harassment, coercive recovery and unfair practices of MFIs and NBFCs, with special focus on women borrowers.”

Ensure that every public sector bank branch has a dedicated service counter/session for SHG women operating on all working days, thus ensuring smooth, efficient and discrimination-free processing of women’s banking and credit related needs.

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