The Self Help Group-Bank Linkage Programme (SBLP) was started in 1992 at the initiative of NABARD. The basic idea of the SBLP is to link the unorganized sector of our population to the formal banking sector. Typically this segment of population is from the lower income that used to meet its financial needs through limited informal sources such as money lenders, traders, family and friends etc. So it was a major effort of the Government to provide banking services to the weaker and unorganised population that lacks access to formal banking.
Formation of self-help group:
Self-help groups are the groups formed by 10-20 commonly women from lower income segment involved in livelihood activities like making candles, artificial jewellery, pavement vendors, hawkers, tailoring jobs, retail shops, livestock rearing, etc. Once the group is formed, the members of the group are encouraged to contribute to a common fund of the group from the amount conveniently saved out from their earnings. The fund so created by the members are used to lend internally for meeting their income generation activities and emergent credit needs at such rate of interest, period of loan and other terms as the group may decide.
SHG Bank linkage programme:
Under SBLP, SHGs so formed get linked to banks via NGOs commonly known as Self Help Promoting Institutions (SHPI), by opening savings account. As per operational guidelines of NABARD, SHGs may be sanctioned savings linked loans by banks (varying from a saving to loan ratio of 1:1 to 1:4). Nevertheless, in case of well-developed SHGs, banks may grant loans beyond the limit of four times the savings as per the discretion of the bank. The limits are sanctioned by the banks on appraisal of the activities of concerned group in respect of regularity of meetings, savings, rotation of funds vis-à-vis recovery of money internally lent, income generation, maintenance of books of accounts, etc. Each bank lending to SHGs will have state credit plan, district credit plan, block credit plan and branch credit plan as an integral part of the bank’s corporate credit plan. The lead banks in their respective forum like Block Level Bankers’ Committee (BLBC), District Consultative Committee (DCC), State Level Bankers’ Committee (SLBC), discuss the problem in all aspects of SHG-bank linkage with the other financial institutions and monitors branch wise achievement of SHG credit status of each bank. For SHG-bank linkage, SLBCs will have a sub-committee consisting members from all banks operating in the State, RBI, NABARD, CEO of SRLM, representatives of State Rural Development Department, Secretary-Institutional Finance and Representatives of Development Departments. The sub- committee meets once in a month with a specific agenda of review, implementation and monitoring of the SHG-Bank linkage and the issues/ constraints in achievement of the credit target.
As per the RBI’s latest Priority Sector Lending norms (May 2016), bank credit to members of SHGs is eligible for priority sector advance under respective categories viz., Agriculture, Micro, Small and Medium Enterprises, Social Infrastructure and Others. The interest rate applicable to loans given by banks to Self Help Groups/member beneficiaries would be left to their discretion.