Interest concession under DAY-NRLM to Women SHGs

[Government’s support to women SHGs in rural area under Deenadayal Anthyodaya Yojana- National Rural livelihoods Mission  DAY-NRLM – (Corpus from Revolving Fund, ‘Panchasutra of good SHGs, CIF loan, the maximum amount of loan, repayment schedule, margin and security for the Bank loans)]

Who can form SHG under DAY-NRLM?

Women Self Help Group (SHG) under DAY-NRLM is the group voluntarily formed by 10-15 women. The special SHG can be formed with 5 persons in the difficult area, remote area or groups with disabled persons, consisting minimum 5 persons. The other persons with disabilities, the elders, trans-genders can only form SHG with both men and women under DAY-NRLM. There is no need to register the SHGs under any act.

What is good SHG?

Each group who have not received Revolving Fund (RF) earlier are eligible for RF as corpus with the minimum of Rs.10000/- and up to a maximum of Rs.15000/-. However, the support in the form of above financial assistance will be extended only to the groups who are successful in following norms of ‘Good SHG’. The good SHG norms prescribe ‘Panchasutra’ viz. Regular savings, Regular recovery Maintenance of proper books of accounts, Regular internal audit, conducting  the regular meeting.

Is  SHG eligible to take the bank loan?

SHG that in active existence for the minimum period of six months may approach banks for financial assistance.  The existence of SHG should be established as per the books of account of SHGs and not from the date of opening of S/B account

Is there any interest concession available to SHG borrowers?

The Public sector Banks, RRBs and Cooperative banks make finance up to Rupees 3 lakhs at 7% per annum to women SHGs in 150 identified districts under interest subvention scheme of DAY-NRLM. The beneficiaries will get additional interest subvention of 3% on prompt payment, reducing the effective rate of interest to 4%.

In the other districts, DAY-NRLM compliant women SHGs are eligible for interest rates at 7% per annum for the loan up to ₹ 3 lakhs. However, this part of the scheme will be operationalized by SRLMs and the loans are subjected to the norms prescribed by the respective SRLMs. (The GOI/RBI notify interest subvention scheme separately for every financial year).

Whether SHG’s are eligible for loans under any other channel?

The SHGs in intensive blocks will get loans through the village level/cluster level federations under Community Investment support Fund (CIF). The CIF loan can be used to undertake the common /collective socio-economic activities.

Whether the SHGs are eligible for Capital Subsidy?

No Capital Subsidy is available under DAY-NRLM scheme.

Whether existing defunct SHGs are eligible to take bank loans?

The existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of 3 months.

What is the maximum amount of loan, repayment schedule, margin and security for the Bank loans?

SHGs avail loans for the purposes of social needs, high-cost debt swapping and taking up sustainable livelihoods by the individual members within the SHGs or to finance any viable common activity started by the SHGs. Banks follow the policy of repeat doses of credit assistance over a period of time. The first dose of credit release will be 4-8 times of proposed corpus or Rs.50000/- whichever is higher. In the second dose, credit amount will be 5-10 times of existing corpus and proposed savings during the next twelve months or Rs.100000/- whichever is higher. The third dose prescribes minimum Rs.200000/- based on Micro credit plan prepared by the SHG. This limit is appraised by the Federation or support agency and the previous credit history. The fourth dose or in subsequent doses, the loan amount can be between Rs.500000/- to Rs.1000000/- based on the Micro Credit Plans of the SHGs. The credit facility may be in the form of Term loan or Cash Credit limit or both based on the need. In case of need, additional loan can be sanctioned even though the previous loan is outstanding

Repayment schedules: The first dose of the loan will be repaid in 6-12 installments, the second dose of the loan will be repaid in 12-24 months. The third dose will be between 2 to 5 Years and in the fourth dose has to be between 3 to 6 Years.

Security and Margin: No collateral and no margin will be charged up to ₹ 10.00 lakhs limit to the SHGs. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.

Related articles:

Activities of Self-Help Groups (SHGs)
What is SHG bank linkage programme?