Karnataka court rules ordinance excludes hire purchase agreements

The Karnataka High Court ruled that the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025, does not apply to hire purchase agreements. The Ordinance is designed to protect borrowers from unlicensed microfinance institutions. The court clarified that the Ordinance specifically targets unsecured microfinance loans for individuals with an annual income of ₹3 lakh or less. It dismissed concerns from the Karnataka Hire Purchase Association, stating that hire purchase is not included in the Ordinance's scope. The court referenced a 2022 Reserve Bank of India circular to define microfinance loans, confirming that hire purchase loans do not fall under this category. The ruling emphasizes the Ordinance's intent to support vulnerable borrowers against exploitative lending practices.