In what comes as a major boost to Self-Help Groups (SHGs), the central government has decided to enhance collateral-free loans to them from ₹10 lakh to ₹20 lakh under the Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM). The Reserve Bank of India (RBI), in a letter dated August 9, 2021, informed the heads of all public sector and private sectors banks (including small finance banks) of the modification in the master circular.
“No collateral to be now required for loans between ₹10 lakh and ₹20 lakh to Self Help Groups (SHGs),” the department of financial services (DHS) said in a tweet on Thursday morning, in which it also posted the RBI letter. “Amendments to Credit Guarantee Fund for Micro Units (CGFMU) scheme notified. The Reserve Bank of India’s master circular has been modified.”
The DFS is the arm of the Union finance ministry that covers the functioning of banks, financial institutions, insurance companies, and the national pension system.
The RBI, in its official modified circular, directed that for loans to SHGs above ₹10 lakh and up to ₹20 lakh, no collateral should be charged and no lien should be marked against the savings bank account of the SHGs. “However, the entire loan (irrespective of the loan outstanding, even if subsequently goes below ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).”
As for loans to the SHGs up to ₹10 lakh, no collateral and no margin will be charged, the RBI said. It further added that for such loans, no lien should be marked against the savings bank account of the SHGs and no deposits should be insisted upon while sanctioning loans.
The RBI letter, signed by the central bank’s chief general manager Kaya Tripathi, noted that all other provisions of the master circular, which was issued on April 1, remain unchanged.
Aajeevika – National Rural Livelihoods Mission (NRLM) was launched by the Union ministry of rural development (MoRD) in June 2011. Four years later, the program was renamed Deendayal Antayodaya Yojana (DAY-NRLM). As per the DAY-NRLM website, the initiative sets out with an agenda to cover seven crore rural poor households, across 600 districts, 6000 blocks, 2.5 lakh gram panchayats, and six lakh villages in the country through self-managed SHGs and federated institutions and support them for livelihoods collectives in a period of 8-10 years.
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