RBI/2018-19/07
FIDD.FID.BC.No.04/12.01.033/2018-19
July
02, 2018
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 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, 2018, as
indicated in the Annex.
Yours faithfully
(Gautam Prasad Borah)
Chief General Manager-in-Charge
Encl: As above
Master
Circular on SHG-Bank Linkage Programme
Self Help Groups have the
potential to bring together the formal banking structure and the rural poor
for mutual benefit. Studies conducted by NABARD in a few states to assess
the impact of the linkage project have 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 is that about 85 per cent of the groups linked with banks were
formed exclusively by women.
2. Recognizing the importance of
SHG Bank linkage, 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 Honorable 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". Linking of SHGs with banks has
thus 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.
3. 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. Accordingly, the following guidelines should be adhered to
enable effective linkage of SHGs with the banking sector.
4. Opening of Savings Bank A/C
a) The SHGs, registered or
unregistered, which are engaged in promoting savings habits among their
members are 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. The instructions of the Department of
Banking Regulation in the Master Direction on
KYC pertaining to SHG members (Part VI-Paragraph 43) shall be
adhered to, while completing Customer Due Diligence (CDD)1 process.
b) Accordingly, the current
instructions under Simplified norms for Self Help Groups (SHGs) mention
that CDD of all the members of SHG as mentioned in the above Direction
shall not be required while opening the savings bank account of the SHG.
CDD of all the office bearers shall suffice. No separate CDD of the members
or office bearers shall be necessary at the time of credit linking of SHGs.
5. Lending to SHGs
a) Bank lending to SHGs should
be included in branch credit plan, block credit plan, district credit plan
and state credit plan of each bank. 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.
b) 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.
c) 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.
6. Interest rates
The banks would have the
discretion to decide on the interest rates applicable to loans given to
Self Help Groups/member beneficiaries.
7. 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.
8. Separate Segment under
priority sector
In order to enable the banks to
report their SHG lending without difficulty, it is 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 loans have been disbursed to the SHG members.
Priority Sector loans to SHGs are considered under “Weaker Sections”
category.
9. 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.
10. Capacity Building and
Training
a) 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.
b) Banks shall refer to
instructions on Financial Literacy by FLCs and rural branches – Policy
review vide Circular
FIDD.FLC.BC.No.22/12.01.018/2016-17 dated March 02, 2017 conducting
tailored programs targeting SHGs.
11. Monitoring and Review of SHG
Lending
Considering the potential of
SHGs, banks shall 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, monitoring of SHG bank linkage
programme shall be 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. The progress under SHG-BLP, as prescribed vide
RBI letter FIDD.CO.FID.No.3387/12.01.033/2017-18 dated April 26, 2018 shall
be reported to NABARD (Micro Credit Innovations Department), Mumbai, on a
quarterly basis, and the returns in the prescribed
format shall be submitted within 15 days from due date.
12. Reporting to CICs
Recognizing the importance of
credit information reporting in respect of the SHG members for financial
inclusion, banks are advised to adhere to the guidelines issued by
Department of Banking Regulation on Credit
information reporting in respect of Self Help Group (SHG) members dated
June 16, 2016 and Credit
information reporting in respect of Self Help Group (SHG) members dated
January 14, 2016.
Annex
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.
|
RBI/2015-16/291
DBR.CID.BC.No.73/20.16.56/2015-16
|
January 14, 2016
|
Credit information reporting
in respect of Self Help Group (SHG) members
|
16.
|
RBI/2015-16/424
DBR.CID.BC.No.104/20.16.56/2015-16
|
June 16, 2016
|
Credit Information Reporting
in respect of Self Help Group (SHG) members
|
17.
|
Master Direction
DBR.AML.BC.No.81/14.01.001/2015-16
|
April 20, 2018
|
Master Direction - Know Your
Customer (KYC) Direction, 2016
|
1 Customer Due
Diligence - means identifying and verifying the customer and the beneficial
owner
|