RBI/2017-18/11
FIDD.FID.BC.No.02/12.01.033/2017-18
July
03, 2017
The Chairman/ Managing Director/
Chief Executive Officer
All Scheduled Commercial Banks
Madam/ Dear Sir
Master Circular on SHG-Bank
Linkage Programme
The Reserve Bank of India has,
from time to time, issued a number of guidelines/instructions to banks on
SHG-Bank Linkage Programme. In order to enable the banks to have
instructions at one place, the Master
Circular incorporating the existing guidelines/instructions on
the subject has been updated and enclosed. This Master Circular
consolidates the circulars issued by Reserve Bank on the subject up to June
30, 2017, as indicated in the Appendix.
Yours faithfully
(Uma Shankar)
Chief General Manager-in-Charge
Encl: As above
Master
Circular on SHG-Bank Linkage Programme
1. Despite the vast expansion of
the formal credit system in the country, dependence of the rural poor on
moneylenders somehow continued in many areas, especially for meeting
unforeseen requirements. Such dependence was pronounced in the case of
marginal farmers, landless labourers, petty traders and rural artisans
belonging to socially and economically backward classes and tribes whose
propensity to save is limited or too small to be mopped up by the banks.
For various reasons, credit to these sections of the population has not
been institutionalized to the extent desired. Studies conducted by NABARD,
APRACA and ILO on the informal groups promoted by Non-Governmental
Organizations (NGOs) brought out that Self-Help Savings and Credit Groups
had the potential to bring together the formal banking structure and the
rural poor for mutual benefit and that their working had been encouraging.
2. Accordingly, NABARD launched
a pilot project to cover Self-Help Groups (SHGs) promoted by
Non-Governmental Organizations, banks and other agencies and supported it
by way of refinance. The quick studies conducted by NABARD in a few states
to assess the impact of the linkage project brought out encouraging and
positive features like increase in loan volume of the SHGs, definite shift
in the loaning pattern of the members from non-income generating activities
to production activities, nearly 100 per cent recovery performance,
significant reduction in the transaction costs for both the banks and the
borrowers etc., besides leading to a gradual increase in the income level
of the SHG members. Another significant feature observed in the linkage
project was that about 85 per cent of the groups linked with banks were
formed exclusively by women.
3. With a view to studying the
functioning of SHGs and NGOs for expanding their activities and deepening
their role in the rural sector, in November 1994, RBI constituted a Working
Group comprising eminent NGO functionaries, academicians, consultants and
bankers, under the Chairmanship of Shri S K Kalia, the then Managing Director,
NABARD. The Working Group was of the view that linking of SHGs with banks
is a cost effective, transparent and flexible approach to improve the
accessibility of credit from the formal banking system to the unreached
rural poor, which is expected to offer the much needed solution to the twin
problems being faced by the banks, viz. recovery of loans in the rural
areas and the high transaction costs in dealing with small borrowers at
frequent intervals. The Group, therefore, felt that the thrust of the policy
should be to encourage the formation of SHGs and linking them with banks,
and in this regard, banks have a major role to play. The Working Group also
recommended that banks should treat the linkage programme as a business
opportunity and they may design area and group specific loan packages,
taking into account inter alia the potential, local needs,
available talent/skills etc.
4. Linking of SHGs with banks
has been emphasized in the Monetary Policy Statements of Reserve Bank of
India and Union Budget announcements from time to time and various
guidelines have been issued to banks in this regard. To scale up the SHGs
linkage programme and make it sustainable, banks were advised that they may
consider lending to SHGs as part of their mainstream credit operations,
both at policy and implementation level. They may include SHG linkage in
their corporate strategy/plan, training curriculum of their officers and
staff and implement it as a regular business activity and monitor and
review it periodically.
5. Separate Segment under
priority sector: In order to enable the
banks to report their SHG lending without difficulty, it was decided that
the banks should report their lending to SHGs for on-lending to members of
SHGs under the respective categories, viz. 'Advances to SHGs' irrespective
of the purposes for which the members of SHGs have been disbursed loans.
Lending to SHGs should be included by the banks as part of their lending to
the weaker sections.
6. Opening of Savings Bank A/c: The SHGs, registered or unregistered, which are
engaged in promoting savings habits among their members would be eligible
to open savings bank accounts with banks. These SHGs need not necessarily
have already availed of credit facilities from banks before opening savings
bank accounts. KYC verification of all the members of SHG shall not be
required while opening the savings bank account of the SHG as KYC
verification of all the office bearers shall suffice. No separate KYC
verification of the members or office bearers shall be necessary at the
time of credit linking of SHGs.
7. 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. While no target is being
prescribed under SHG bank linkage programme, utmost priority should be
accorded to the sector in preparation of these plans. It should also form
an integral part of the bank’s corporate credit plan.
8. Margin and Security Norms: As per operational guidelines issued by NABARD,
SHGs may be sanctioned savings linked loans by banks (varying from a saving
to loan ratio of 1:1 to 1:4). However, in case of matured SHGs, loans may
be given beyond the limit of four times the savings as per the discretion
of the bank.
9. Documentation: A simple system requiring minimum procedures and
documentation is a precondition for augmenting flow of credit to SHGs.
Banks should strive to remove all operational irritants and make
arrangements to expeditiously sanction and disburse credit by delegating
adequate sanctioning powers to branch managers. The loan application forms,
procedures and documents should be made simple. It would help in providing
prompt and hassle-free credit.
10. Presence of defaulters in
SHGs: Defaults by a few members
of SHGs and/or their family members to the financing bank should not
ordinarily come in the way of financing SHGs per se by banks, provided the
SHG is not in default. However, the bank loan may not be utilized by the SHG
for financing a defaulter member to the bank.
11. Capacity Building and
Training: Banks may initiate
suitable steps to internalize the SHGs linkage project and organize
exclusive short duration programmes for the field level functionaries. In
addition, suitable awareness/sensitization programmes may be conducted for
their middle level controlling officers as well as senior officers.
12. Monitoring and Review of SHG
Lending: Having regard to the
potential of SHGs, banks may have to closely monitor the progress regularly
at various levels. In order to give a boost to the ongoing SHG bank linkage
programme for credit flow to the unorganized sector, banks were advised in
January 2004 that monitoring of SHG bank linkage programme may be made a
regular item on the agenda for discussion at the SLBC and DCC meetings. It
should be reviewed at the highest corporate level on a quarterly basis.
Further, progress of the programme may be reviewed by banks at regular
intervals. A progress report, as prescribed vide circular
FIDD.FID.BC.No.56/12.01.033/2014-15 dated May 21, 2015, may be sent
to NABARD (Micro Credit Innovations Department), Mumbai, on a half-yearly
basis, as on 30 September and 31 March each year so as to reach within 30
days of the half-year to which the report relates.
13. Encourage SHG Linkage: Banks should provide adequate incentives to their
branches in financing the Self Help Groups (SHGs) and establish linkages
with them, making the procedures simple and easy. The group dynamics of
working of the SHGs need neither be regulated nor formal structures imposed
or insisted upon. The approach to financing of SHGs should be totally
hassle-free and may also include consumption expenditures.
14. Interest rates: The banks would have the discretion to decide on
the interest rates applicable to loans given to Self Help Groups/member
beneficiaries.
15. Service/ Processing charges: No loan related and ad hoc service
charges/inspection charges should be levied on priority sector loans up to ?
25,000. In the case of eligible priority sector loans to SHGs/ JLGs, this
limit will be applicable per member and not to the group as a whole.
16. Total Financial Inclusion
and Credit Requirement of SHGs: Banks
have been advised to meet the entire credit requirements of SHG members, as
envisaged in Paragraph 93 of the Union Budget announcement for the year
2008-09, made by the Honourable Finance Minister, wherein it was stated as
under: "Banks will be encouraged to embrace the concept of Total
Financial Inclusion. Government will request all scheduled commercial banks
to follow the example set by some public sector banks and meet the entire
credit requirements of SHG members, namely, (a) income generation
activities, (b) social needs like housing, education, marriage, etc. and
(c) debt swapping".
Appendix
List
of Circulars consolidated in the Master Circular
Sr.
No.
|
Circular
No.
|
Date
|
Subject
|
1.
|
RPCD.No.Plan.BC.13/PL-09.22/91/92
|
July 24,1991
|
Improving Access of Rural poor
to Banking- Role of Intervening Agencies- Self Help Groups
|
2.
|
RPCD.No.PL.BC.120/04.09.22/95-96
|
April 2,1996
|
Linking of Self Help Groups
with banks- Working Group on NGOs and SHGs- recommendations –Follow up
|
3.
|
DBOD.DIR.BC.11/13.01.08/98
|
February 10, 1998
|
Opening of Savings bank
accounts in the name of Self Help Groups(SHGs)
|
4.
|
RPCD.PI.BC/12/04.09.22/98-99
|
July 24, 1998
|
Linking of Self Help Groups
with Banks
|
5.
|
RPCD.No.PLAN.BC.94/04.09.01/98-99
|
April 24,1999
|
Loans to Micro Credit
Organizations- Rates of Interest
|
6.
|
RPCD.PL.BC.28/04.09.22/99-2000
|
September 30, 1999
|
Credit delivery through Micro
Credit Organizations/ Self Help Groups
|
7.
|
RPCD.No.PL.BC.62/04.09.01/99-2000
|
February 18, 2000
|
Micro credit
|
8.
|
RPCD.No.Plan.BC.42/04.09.22/2003-04
|
November 03, 2003
|
Micro Finance
|
9.
|
RPCD No.Plan.BC.61/04.09.22/2003-04
|
January 09, 2004
|
Credit flow to the unorganized
sector
|
10.
|
RBI/385/2004-05,
RPCD.No.Plan.BC.84/04.09.22/2004-05
|
March 03, 2005
|
Submitting progress report
under micro credit
|
11.
|
RBI/2006-07/441
RPCD.CO.MFFI.BC.No.103/12.01.01/2006-07
|
June 20, 2007
|
Microfinance-Submission of
progress reports
|
12.
|
RPCD.MFFI.BC.No.56/12.01.001/2007-08
|
April 15, 2008
|
Total Financial inclusion and
Credit Requirement of SHGs.
|
13.
|
DBOD.AML.BC.No.87/14.01.001/2012-13
|
March 28, 2013
|
Know Your Customer Norms/Anti
Money Laundering Standards/ Combating of Financing of
Terrorism/Obligation of banks under Prevention of Money Laundering Act,
2002 – Simplifying norms for Self Help Groups
|
14
|
FIDD.FID.BC.No.56/12.01.033/2014-15
|
May 21, 2015
|
SHG-Bank Linkage Programme –
Revision of progress reports
|
15
|
Master Direction
DBR.AML.BC.No.81/14.01.001/2015-16
|
February 25, 2016
|
Master Direction - Know Your
Customer (KYC) Direction, 2016
|
|