SHG-Bank Linkage Programme

To scale up the SHGs linkage programme and make it sustainable, banks are advised to consider lending to SHGs as part of their mainstream credit operations.

Separate Segment under priority sector: Banks should report their lending to SHGs and NGOs (for on-lending to SHGs or members of SHGs) under the new segment, 'Advances to SHGs'and include it as a part of Bank’s lending to the weaker sections.

Opening of Savings Bank A/c: The SHGs which are engaged in promoting savings habits among their members would be eligible to open savings bank accounts. KYC verification of only the office bearers would be sufficient.

SHG lending to be a part of planning process: Bank lending to SHGs should be included in branch credit plan, block credit plan, district credit plan and state credit plan of each bank. It should also form an integral part of the bank’s corporate credit plan.

Margin and Security Norms: SHGs may be sanctioned savings linked loans (varying from a saving to loan ratio of 1:1 to 1:4). In case of matured SHGs, loans may be given beyond the limit as per Bank’s discretion. The flexibility allowed in respect of margin, security norms, etc. under the pilot project shall continue.

Documentation: Banks should delegate adequate sanctioning powers to branch managers to expedite the process. The paper work and documents should be kept as simple as possible.

Presence of defaulters in SHGs: Default by a few members should not come in the way of financing SHGs provided the SHG itself is not in default. However, the loan should not be utilized for financing a defaulter.

Capacity Building and Training: Banks should internalize the SHGs linkage project and organize exclusive short duration training programmes for the field level functionaries. Awareness programmes should also be conducted for the middle level as well as senior officers.

Monitoring and Review of SHG Lending: Monitoring of the programme are to be made a regular item for discussion at the SLBC and DCC meetings. It should be reviewed at the highest corporate level on a quarterly basis. A progress report, may be sent to NABARD on a half-yearly basis, as on 30 September and 31 March each year.

Encourage SHG Linkage: Banks should provide adequate incentives to their branches for financing the SHGs and establishing linkages with them. The group dynamics of working of the SHGs may be left to themselves.

Interest rates: The interest rate would be at the discretion of the Bank.

Total Financial Inclusion and Credit Requirement of SHGs: Banks are to meet the entire credit requirements of SHG members, namely,

• income generation activities,
• social needs like housing, education, marriage, etc. and
• debt swapping".

Based on RBI Circular dt 01/07/15. Please visit www.rbi.org.in for any further clarification if required…..          Poppy