RBI announces to double the collateral free loans to Self Help Groups

RBI today announced to double collateral-free loans to Rs 20 lakh for Self Help women groups from existing limit of Rs.10 lakh under Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).

In its notification dated August 9, the regulator advised the banks to follow the below instructions in respect of Security and Margin for collateral free loans.

1.  “For loans to SHGs up to Rs 10.00 lakh, no collateral and no margin will be charged. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans”.

2.   “For loans to SHGs above Rs 10 lakh and up to Rs 20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs. However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).”

Finance Minister Nirmala Sitharaman on Thursday made the following announcement in this regard. Doubling of collateral-free loans to Rs 20 lakh for Self Help women groups that would benefit 7 crore households, she said.

Sitharaman also said that doubling the amount would increase money in the hand of SHGs that will help them to cover the loss caused during to coronavirus lockdown. With this announcement, 63 lakh women’s self-help groups can avail of collateral-free loans for its operations.