PSL 5 - Social Lending Schemes

Objective To inform the salient features of important Social lending schemes and the
role of the Banks in implementing them.
Contents Introduction
Social Lending Schemes:
1.NRLM
2.NULM
3.Self-Employment Scheme for Rehabilitation of Manual Scavengers(SRMS)
4.Prime Minister’s Employment Guarantee Programme (PMEGP)
5.Differential Rate of Interest Scheme (DRI)
Conclusion

Introduction

In a developing economy like ours, inclusive development is one of the focus areas and
several schemes are launched by various State Governments and Central Government
for the upliftment of the poor. Unless there is equitable distribution of wealth we
cannot boast about the strides of development in the country. Always the Government
has a responsibility of enabling the poor to prosper and for that purpose many poverty
alleviation schemes are launched from time to time. The Banks, as responsive and
responsible Corporate Citizens, have a duty to involve in the implementation of these
schemes, particularly when there is a need for financial intervention.

In addition to social responsibility aspect, the Social Lending Schemes offer a lending
or business opportunity for a banker. The classic example of Bangladesh Gramina Bank
is an eye opener. There are many examples in each Branch, which show that
beneficiaries of social lending schemes are capable of improving their income levels
and crossing the “poverty line”. Further, the propensity to save is higher with poor
than the rich.

Social Lending Schemes

Out of the many Social Lending Schemes launched by the Central Govt. and various
State Governments, Centrally sponsored schemes, which are uniform through out the
country, are presented below:

Scheme guidelines of NRLM-Aajeevika

1. Background:

1.1 The Ministry of Rural Development, Government of India has launched

National Rural Livelihood Mission (NRLM) by restructuring Swarnajayanti Gram
Swarozgar Yojana (SGSY) replacing the existing SGSY scheme, effective from April
1, 2013.

1.2. NRLM is the flagship program of Govt. of India for promoting poverty
reduction through building strong institutions of the poor, particularly women,
and enabling these institutions to access a range of financial services and
livelihoods services. NRLM is designed to be a highly intensive program and
focuses on intensive application of human and material resources in order to

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mobilize the poor into functionally effective community owned institutions,
promote their financial inclusion and strengthen their livelihoods. NRLM
complements these institutional platforms of the poor with services that
include financial and capital services, production and productivity enhancement
services, technology, knowledge, skills and inputs, market linkage, etc. The
community institutions also offer a platform for convergence and partnerships
with various stakeholders by building environment for the poor to access their
rights and entitlements and public service.

1.3 A women self help group, coming together on the basis of mutual affinity
is the primary building block of the NRLM community institutional design. NRLM
focuses on building, nurturing and strengthening the institutions of the poor
women, including the SHGs and their Federations at village and higher levels. In
addition NRLM will promote livelihoods institutions of rural poor. The mission will
provide a continuous hand-holding support to the institutions of poor for a period
of 5 – 7 years till they come out of abject poverty. The community institutional
architecture put in place under NRLM will provide support for a much longer
duration and of a greater intensity.

1.4 The support from NRLM will include all round capacity building of the SHGs
ensuring that the group functions effectively on all issues concerning their
members, financial management, providing them with initial fund support to
address vulnerabilities and high cost indebtedness, formation and nurturing of
SHG federations, making the federations as strong support organizations, making
the livelihoods of the poor sustainable, formation and nurturing of
livelihoods organizations, skill development of the rural youth to take up self
enterprises or jobs in organized sector, enabling these institutions to access
their entitlements from the key line departments, etc.

1.5 The implementation of NRLM is in a Mission Mode. NRLM adopts a demand

driven approach, enabling the States to formulate their own State specific
poverty reduction action plans. NRLM enables the State rural livelihoods
missions to professionalize their human resources at State, District and Block
level. The State missions are capacitated to deliver a wide range of quality
services to the rural poor. NRLM emphasizes continuous capacity building,
imparting requisite skills and creating linkages with livelihoods opportunities for
the poor, including those emerging in the organized sector, and monitoring
against targets of poverty reduction outcomes. The B locks and Districts in which
all the components of NRLM will be implemented, either through the SRLMs or
partner institutions or NGOs, will be the intensive blocks and Districts, whereas
remaining will be non-intensive blocks and D istricts. The selection of intensive
D istricts will be done by the S tates based on the demographic vulnerabilities. It
will be rolled out in a phased manner over the next 7 - 8 years. All blocks in the
country will become intensive blocks over time.

2. Key difference from SGSY:

2.1 NRLM is promoting a major shift from purely ‘allocation based’ strategy to a
‘demand driven’ strategy wherein states have the flexibility to develop their
own plans for capacity building of women SHGs and Federations, infrastructure
and marketing, and policy for financial assistance for the SHGs.

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2.2 NRLM will identify the target group of poor through a ‘participatory
identification of the poor’ process instead of using the BPL list as was done in
SGSY. This will ensure that the voiceless, poorest of poor are not ignored. In fact
under NRLM, the first preference is given to the poorest of poor households.

2.3 NRLM will promote the formation of women SHGs on the basis of affinity and not
on the basis of a common activity, as it used to be under SGSY. It is definitely
possible that members who come together on the basis of affinity could be having a
common activity.

2.4 Unlike SGSY, the NRLM has taken a saturation approach and will ensure all the
poor in a village are covered and a woman from each poor family is motivated to join
the SHG.

2.5 SHG Federations: All SHGs in a village come together to form a federation at
the village level. The village federation is a very important support structure for
the members and their SHGs. The cluster federation is the next level of
federation. A cluster consists of a group of villages within a block. The exact
configuration will vary from State to State, but typically a cluster consists of 25 -
40 villages. The Village federations and the Cluster federations are the two
critical support structures for the SHG s and their members in their long journey
out of poverty.

2.6 NRLM will provide continuous hand-holding support to SHGs, and their
federations. This was missing in SGSY. Under NRLM this support will be provided
to a great extent by capacitating the SHG federations and by building a cadre of
community professionals from among the poor women. The federations and the
community professionals will be imparted the necessary skills by the mission.

2.7 The objective of NRLM is to ensure that SHGs are enabled to access repeat finance
from Banks, till they attain sustainable livelihoods and decent living standards. This
was missing in SGSY, where the emphasis was on one-time support.

Annexure-II (HOC 366/2013 dated 06.07.2013) provides with the key features of
NRLM.

3. Women SHGs and their Federations

3.1 Women SHGs under NRLM consist of 10-15 persons. In case of special SHGs
i.e. groups in the difficult areas, groups with disabled persons, and groups
formed in remote tribal areas, this number may be a minimum of 5 persons.

3.2 NRLM will promote affinity based women Self –help groups.

3.3 Only for groups to be formed with Persons with disabilities, and other special
categories like elders, transgenders, NRLM will have both men and women in the self-
help groups.

3.4 SHG is an informal group and registration under any Societies Act, State
Cooperative Act or a partnership firm is not mandatory vide Circular

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RPCD. No. Plan BC.13/PL-09.22/90-91 dated July 24th, 1991. However
Federations of SHGs formed at village level, cluster level and at higher levels are
to be registered under appropriate acts prevailing in their States.

Financial Assistance to the SHGs

4 Revolving Fund (RF): NRLM would provide a Revolving Fund (RF) support to SHGs in
existence for a minimum period of 3/6 months and follow the norms of good SHGs, i.e
they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal
lending, regular recoveries and maintenance of proper books of accounts. Only
such SHGs that have not received any RF earlier will be provided with RF, as
corpus, with a minimum of Rs. 10,000 and up to a maximum of Rs.15,000 per SHG.
The purpose of RF is to strengthen their institutional and financial management
capacity and build a good credit history within the group.

5. Capital Subsidy has been discontinued under NRLM:

No Capital Subsidy will be sanctioned to any SHG from the date of implementation of
NRLM.

6. Community Investment Support Fund (CIF)

CIF will be provided to the SHGs in the intensive blocks, routed through the
Village level/ Cluster level Federations, to be maintained in perpetuity by the
Federations. The CIF will be used, by the Federations, to advance loans to the
SHGs and/or to undertake the common/collective socio- economic activities.

7. Introduction of Interest Subvention:

NRLM has a provision for interest subvention, to cover the difference between the
Lending Rate of the banks and 7%, on all credit from the banks/ financial
institutions availed by women SHGs, for a maximum of Rs 3,00,000 per SHG. This
will be available across the country in two ways:

i. In 2 50 identified districts, banks will lend to all the women SHGs @7%
upto an aggregated loan amount of Rs 3,00,000/-. The SHGs will also get
additional interest subvention of 3% on prompt payment, reducing the
effective rate of interest to 4%. (HOC 572/2016 dated 14.09.2016, earlier
150 Districts)
ii. In the remaining districts also, NRLM compliant women SHGs will be registered
with SRLMs. These SHGs are eligible for interest subvention to the extent of
difference between the lending rates and 7% for the loan upto Rs. 3 lakhs,
subjected to the norms prescribed by the respective SRLMs. This part of the
scheme will be operationalized by SRLMs.

8. Role of banks –

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8.1 Opening of Savings accounts: The role of banks would commence with opening of
accounts for all the Women SHGs, SHGs with members of Disability and the
Federations of the SHGs. The ‘Know Your Customer’ (KYC) norms as specified from
time to time by Reserve Bank of India are applicable for identification of the
customers.

8.2 Lending Norms:

8.2.1) the eligibility criteria for the SHGs to avail loans

• SHG should be in active existence at least since the last 6 months as per
the books of account of SHGs and not from the date of opening of S/B
account.
• SHG should be practicing ‘Panchasutras’ i.e. Regular meetings; Regular
savings; Regular inter-loaning; Timely repayment and Up-to-date books of
accounts.
• Qualified as per grading norms fixed by NABARD. As and when the
Federations of the SHGs come to existence, the grading exercise can be
done by the Federations to support the Banks.
• 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.

8.2.2. Loan amount: Emphasis is laid on the multiple doses of assistance under
NRLM. This would mean assisting an SHG over a period of time, through repeat
doses of credit, to enable them to access higher amounts of credit for taking up
sustainable livelihoods and improve on the quality of life. The amount of various
doses of credit should be as follows:

• First dose: 4-8 times to the proposed corpus during the year or Rs. 50,000
whichever is higher.
• Second dose: 5-10 times of existing corpus and proposed saving during
the next twelve months or Rs. 1 lakhs, whichever is higher.
• Third dose: Minimum of Rs. 2 lakhs, based on the Micro credit plan
prepared by the SHGs and appraised by the Federations/Support agency and
the previous credit history
• Fourth dose onwards: Loan amount can be between Rs. 5-10 lakhs for fourth
dose and/or higher in subsequent doses. The loan amount will be based on the
Micro Credit Plans of the SHGs and their members.

The loans may be used for meeting 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.

(Corpus is inclusive of revolving funds, if any, received by that SHG, its own
savings and funds from other sources in case of promotion by other institutes/NGOs.)

8.3 Type of facility and repayment:

8.3.1 SHGs can avail either Term loan or a CCL loan or both based on the need. In
case of need, additional loan can be sanctioned even though the previous loan is
outstanding.

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8.3.2. Repayment schedule is as follows:

• The first dose of loan will be repaid in 6-12 instalments

• Second dose of loan will be repaid in 12-24 months.
• Third dose will be sanctioned based on the micro credit plans, the
repayment has to be either monthly/quarterly /half yearly based on the cash
flow and it has to be between 2 to 5 Years.
• Fourth dose onwards: repayment has to be either monthly/quarterly /half
yearly based on the cash flow and it has to be between 3 to 6 Years

8.4. Security and Margin:

No collateral and no margin will be charged upto Rs. 10.00 lakhs limit to the SHGs.
No lien should be marked against savings bank account of SHGs and no
deposits should be insisted while sanctioning loans.

8.5. Dealing with Defaulters:

8.5.1 It is desirable that wilful defaulters should not be financed under

NRLM. In case wilful defaulters are members of a group, they might be allowed
to benefit from the thrift and credit activities of the group including the corpus
built up with the assistance of Revolving Fund. But at the stage of assistance for
economic activities, the wilful defaulters should not have the benefit of further
assistance until the outstanding loans are repaid. Wilful defaulters of the group
should not get benefits under the NRLM Scheme and the group may be financed
excluding such defaulters while documenting the loan.

8.5.2 Further, non-wilful defaulters should not be debarred from receiving the
loan. In case of defaulters due to genuine reasons, Banks may follow the norms
suggested for restructuring the account with revised repayment schedule.

9. Credit Target Planning

9.1 Based on the potential linked plan/state focus paper prepared by NABARD,
SLBC sub-committee may arrive at the district-wise, block-wise and branch-wise
credit plan. The sub- committee has to consider the existing SHGs, New SHGs
proposed, and number of SHGs eligible for fresh and repeat loans as suggested by
the SRLMs to arrive at the credit targets for the states. The targets so
decided should be approved in the SLBC and should be reviewed and monitored
periodically for effective implementation

9.2. The district-wise credit plans should be communicated to the DCC. The Block-
wise/Cluster- wise targets are to be communicated to the bank Branches through the
Controllers.

10. Post credit follow-up

10.1 Loan pass books in regional languages may be issued to the SHGs which may
contain all the details of the loans disbursed to them and the terms and
conditions applicable to the loan sanctioned. The passbook should be updated
with every transaction made by the SHGs. At the time of documentation and

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disbursement of loan, it is advisable to clearly explain the terms and
conditions as part of financial literacy

10.2 Bank branches may observe one fixed day in a fortnightly to enable the staff
to go to the field and attend the meetings of the SHGs and Federations to
observe the operations of the SHGs and keep a track of the regularity in the SHGs
meetings and performance.

11. Repayment:

Prompt repayment of the loans is necessary to ensure the success of the

programme. Banks shall take all possible measures, i.e. personal contact,
organization of joint recovery camps with District Mission Management
Units(DPMUs) / DRDAs to ensure the recovery of loans. Keeping in view, the
importance of loan recovery, banks should prepare a list of defaulters under NRLM
every month and furnish the list in the BLBC, DLCC meetings. This would ensure
that NRLM staff at the district/block level will assist the bankers in initiating the
repayment.

12. Deputation of the bank officials to SRLMs

As a measure of strengthening the (DPMUs) / DRDAs and for promoting a better

credit environment, deputation of the bank officials to DPMUs/ DRDAs has been
suggested. Banks may consider deputing officers at various levels to the State
Governments/DRDAs in consultation with them.

13. Supervision and monitoring of the Scheme.

Banks may set up NRLM cells at Regional/Zonal office. These cells should
periodically monitor and review the flow of credit to the SHGs, ensure the
implementation of the guidelines to the scheme, collect data from the branches
and make available consolidated data to the Head office and the NRLM units at
the districts/ blocks. The cell should also discuss this consolidated data in the
SLBC, BLBC and DCC meetings regularly to maintain the effective communication
with the state staff and all banks.

13.1 State Level Banker’s Committee: SLBCs shall constitute a sub-

committee on SHG-bank linkage. The sub-committee should consist of 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 etc. The
sub- committee shall meet once 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. The decisions of SLBCs should be
derived from the analysis of the reports of the sub-committee.

13.2 District Coordination Committee: The DCC (NRLM sub-committee) shall

regularly monitor the flow of credit to SHGs at the district level and resolve
issues that constrain the flow of credit to the SHGs at district level. This
committee meeting should have participation of LDMs, AGM of NABARD, district
coordinators of the banks and DPMU staff representing NRLM and office bearers of

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SHG federations.

13.3 Block level Bankers Committee: The BLBC shall meet regularly and take
up issues of SHG bank linkage at the block level. In this Committee, the SHGs/
Federations of the SHGs should be included as members to raise their voice in
the forum. Branch wise status of SHG credit shall be monitored at the BLBC
(Annex B and C may be used for the purpose)

13.4Reporting to Lead District Managers:The branches may furnish the progress

report and the delinquency report achieved under various activities of NRLM in the
format at Annexure ‘III’ and ‘AnnexureIV’ to the LDM every month for onward
submission to Special Steering Committee/sub- committee constituted by SLBC.

13.5Reporting to RBI: Banks may give a state-wise consolidated report on the

progress made on NRLM to RBI/NABARD at monthly intervals.

13.6 Reporting on SHG-Bank linkages: NABARD shall submit monthly report on

the SHG bank linkage, data for which shall flow from the CBS platform to NRLM on
regular basis.

13.7 LBR returns:Existing procedure of submitting LBR returns to be continued duly

furnishing the correct code.

14. Data Sharing:

Data sharing on a mutually agreed format / interval may be provided to SRLM for
initiating various strategies including recovery etc.The financing banks may
enter into a Memorandum of Understanding (MOU) for regular data sharing
with the State Rural Livelihood Missions, through the CBS platform.

15. NRLM support to the bankers:

15.1 SRLM would develop strategic partnerships with major banks at various levels. It
would invest in creating enabling conditions for both the banks and the poor
for a mutually rewarding relationship.

15.2 SRLM will assist the SHGs through imparting Financial literacy, extending
counseling services on savings, credit and training on Micro-investment Planning
embedded in capacity building

15.3 Improving quality of banking services to poor clients by positioning customer

relationship managers (Bank Mitra)

15.4 Leveraging IT mobile technologies and institutions of poor and youth as

business facilitators and business correspondents.

15.5. Community based recovery mechanism: One exclusive sub - committee for
SHG Bank Linkage may be formed at village/cluster/ block level which will
provide support to the banks in ensuring proper utilization of loan amount,
recovery etc. The bank linkage sub - committee members from each village level
federation along with project staff will meet once in a month under the

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chairmanship of the Branch Manager in the branch premises with the agenda items
relating to bank linkage.

16. Closure of SGSY Scheme.

16.1Extending credit under NRLM replacing SGSY will commence from 1st July 2013.

16.2The loans sanctioned by banks on or after April 1st, 2013 will be covered
under the ambit of NRLM.

16.3 In case of part disbursal of loans, the Banks may disburse the full amount by
availing the balance subsidy amount under SGSY.

16.4 Interest subvention scheme is not applicable for the outstanding loans
sanctioned under SGSY, where capital subsidy is already released.

Key Features of NRLM:

1. Universal Social Mobilization: To begin with, NRLM would ensure that at least one
member from each identified rural poor household, preferably a woman, is brought
under the Self Help Group (SHG) network in a time bound manner. Subsequently,
both women and men would be organized for addressing livelihoods issues i.e.
farmers organizations, milk producers’ cooperatives, weavers associations, etc. All
these institutions are inclusive and no poor would be left out of them. NRLM would
ensure adequate coverage of vulnerable sections of the society such that 50%
of the beneficiaries are SC/STs, 15% are minorities and 3% are persons with
disability, while keeping in view the ultimate target of 100% coverage of BPL
families.

2. Participatory identification of poor (PIP): The experience from SGSY suggests

that the current BPL list has large inclusion and exclusion errors. To widen the target
groups beyond the BPL list and to include all the needy poor, NRLM will undertake
community based process i.e. participation of the poor process to identify its target
group. Participatory process based on sound methodology and tools (social mapping
and well being categorization, deprivation indicators) and also locally understood
and accepted criterion ensures local consensus that inadvertently reduces the
inclusion and exclusion errors, and enables formation of the groups on the basis of
mutual affinity. Over the years, the participatory method of identifying the poor
have been developed and applied successfully in the states like AP, Kerala, Tamil
Nadu and Odisha.

The households identified as poor through the P.I.P process will be accepted as
NRLM target group and will be eligible for all the benefits under the programme.
The list finalized after PIP process will be vetted by the Gram Sabha and approved
by the Gram Panchayat.

Till the PIP process is undertaken by the State in a particular district/Block, the
rural households already included in the official BPL list will be targeted under
NRLM. As already provided in the Framework for implementation of NRLM, up to
30% of the total membership of the SHGs may be from among the population
marginally above the poverty line, subject to the approval of the BPL members
of the group. This 30% also includes the excluded poor, those who are really as
poor as those included in BPL list but their name does not figure in the list.

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3. Promotion of Institutions of the poor: Strong institutions of the poor such as
SHGs and their village level and higher level federations are necessary to provide
space, voice and resources for the poor and for reducing their dependence on
external agencies. They empower them and also act as instruments of knowledge and
technology dissemination, and hubs of production, collectivization and commerce.
NRLM, therefore, would focus on setting up these institutions at various levels. In
addition, NRLM would promote specialized institutions like Livelihoods
collectives, producers’ cooperatives/companies for livelihoods promotion through
deriving economies of scale, backward and forward linkages, and access to
information, credit, technology, markets etc. The Livelihoods collectives would
enable the poor to optimize their limited resources.

4. Strengthening all existing SHGs and federations of the poor. There are
existing institutions of the poor women formed by Government efforts and efforts
of NGOs. NRLM would strengthen all existing institutions of the poor in a
partnership mode. The self-help promoting institutions both in the Government and
in the NGO sector would promote social accountability practices to introduce
greater transparency. This would be in addition to the mechanisms that would be
evolved by SRLMs and state governments. The learning from one another underpins
the key processes of learning in NRLM.

5. Emphasis on Training, Capacity building and skill building: NRLM would

ensure that the poor are provided with the requisite skills for: managing their
institutions, linking up with markets, managing their existing livelihoods,
enhancing their credit absorption capacity and credit worthiness, etc. A
multi-pronged approach is envisaged for continuous capacity building of the
targeted families, SHGs, their federations, government functionaries, bankers,
NGOs and other key stakeholders. Particular focus would be on developing and
engaging community professionals and community resource persons for capacity
building of SHGs and their federations and other collectives. NRLM would
make extensive use of ICT to make knowledge dissemination and capacity building
more effective.

6. Revolving Fund and Community investment support Fund (C.I.F): A Revolving

Fund would be provided to eligible SHGs as an incentive to inculcate the habit of
thrift and accumulate their own funds towards meeting their credit needs in the
long-run and immediate consumption needs in the short-run. The C.I.F would be a
corpus and used for meeting the members’ credit needs directly and as catalytic
capital for leveraging repeat bank finance. The C.I.F would be routed to the SHGs
through the Federations. The key to coming out of poverty is continuous and
easy access to finance, at reasonable rates, till they accumulate their own funds
in large measure.

7. Universal Financial Inclusion: NRLM would work towards achieving universal

financial inclusion, beyond basic banking services to all the poor households, SHGs
and their federations. NRLM would work on both demand and supply side of
Financial Inclusion. On the demand side, it would promote financial literacy among
the poor and provides catalytic capital to the SHGs and their federations. On the

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supply side, it would coordinate with the financial sector and encourage use of
Information, Communication & Technology (ICT) based financial technologies,
business correspondents and community facilitators like ‘Bank Mitras’. It would
also work towards universal coverage of rural poor against loss of life, health
and assets. Further, it would work on remittances, especially in areas where
migration is endemic.

8. Provision of Interest Subvention: The rural poor need credit at low rate of
interest and in multiple doses to make their ventures economically viable. In
order to ensure affordable credit, NRLM has a provision for subvention on interest
rate above 7% per annum for all eligible SHGs, who have availed loans from
mainstream financial institutions. (The final guidelines on this will be released
after the requisite approvals.)

9. Funding Pattern: NRLM is a Centrally Sponsored Scheme and the financing of

the programme would be shared between the Centre and the States in the ratio
of 75:25 (90:10 in case of North Eastern States including Sikkim; completely from
the Centre in case of UTs). The Central allocation earmarked for the States would
broadly be distributed in relation to the incidence of poverty in the States.

10. Phased Implementation: Social capital of the poor consists of the institutions
of the poor, their leaders, community professionals and more importantly
community resource persons (poor women whose lives have been transformed
through the support of their institutions). Building up social capital takes some
time in the initial years, but it multiplies rapidly after some time. If the social
capital of the poor does not play the lead role in NRLM, then it would not
be a people’s programme. Further, it is important to ensure that the
quality and effectiveness of the interventions is not diluted. Therefore, a
phased implementation approach is adopted in NRLM. NRLM would reach all
districts by the end of 12th Five-year Plan.

11. Intensive blocks: The blocks that are taken up for implementation of NRLM,
‘intensive blocks’, would have access to a full complement of trained
professional staff and cover a whole range of activities of universal and intense
social and financial inclusion, livelihoods, partnerships etc. However, in the
remaining blocks or non-intensive blocks, the activities may be limited in scope
and intensity.

12. Rural Self Employment Training Institutes (RSETIs). RSETI concept is

built on the model pioneered by Rural Development Self Employment Institute
(RUDSETI) – a collaborative partnership between SDME Trust, Syndicate Bank
and Canara Bank. The model envisages transforming unemployed youth into
confident self- employed entrepreneurs through a short duration
experiential learning programme followed by systematic long duration hand
holding support. The need-based training builds entrepreneurship qualities,
improves self-confidence, reduces risk of failure and develops the trainees into
change agents. Banks are fully involved in selection, training and post training
follow up stages. The needs of the poor articulated through the institutions of the
poor would guide RSETIs in preparing the participants/trainees in their pursuits of
self-employment and enterprises. NRLM would encourage public sector banks to
set up RSETIs in all districts of the country.

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Nomenclature

All the loans granted to Women SHG Groups have been covered under National
Rural Livelihood Mission (NRLM) since 01.04.2013.

The New Nomenclatures (SHGNT OR SHGNC) have been since enabled in the CBS for
opening the all women SHG loan accounts under NRLM scheme.

Branches should open women beneficiaries SHG loan accounts under loan account
heads SHGNT OR SHGNC only & not in any other account heads like SHG,SHGCC &
CCSHG.

Nomenclature/Account Type : Cash Credit Nomenclature/Account Type:-

accounts Term Loans

SHGNC (SHG group-cash credit -NRLM) SHGNT (SHG-term loan-NRLM)

Branches should ensure opening of SB accounts as saving bank account details of

these SHGs are mandatory for claiming the interest subvention under the scheme.

Frequently Asked Questions (FAQs) on Self Help Groups (SHGs)- Bank Linkage
under Deenadayal Antyodaya Yojana-National Rural Livelihood Mission (DAY-
NRLM) - HOC 337/2018 dated 25.05.2018

Ministry of Rural Development (MoRD) has prepared a document on Frequently

Asked Questions (FAQs) to help the field functionaries in properly understanding
the SHG Bank Linkage under DAY-NRLM.

Q.1:- Can a SHG open Saving Bank Account in nearest branch of the bank
which is not in the service area?
Ans: - Yes, SHG can open saving account with any bank.
Ref: - RBI master circular on Micro Credit No RBI/2010-11/407, RPCD. FID. BC.No.
53 / 12.01.001/ 2010-11 date 14 Feb., 2011 and master circular on SHG bank
Linkage No RBI/2017-18/11, FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3,
2017.
Q. 2:- Is it necessary for the SHG to be registered for opening of the Saving
Bank Account?
Ans: - Registration of SHG is not necessary for opening of the saving bank account.
SHG may or may not be registered. But in cases where the SHG consist of more
than 20 members, it shall be registered as company under the Companies Act.
Ref:- RBI master circular on Micro Credit No RBI/2010-11/407, RPCD. FID. BC.No.
53 / 12.01.001/ 2010-11 date 14 Feb., 2011 and master circular on SHG bank
Linkage No RBI/2017-18/11, FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3,
2017 page 3 item No 6.
Q.3:- What are documents required for opening of the saving bank account
with the Bank.
Ans: - Following documents are required for opening of the saving bank account:-

12
� Account opening Form
� Resolution of the SHG for opening of saving bank account with the Bank and
authority to office bearers to open and operate the account.
Operation of the account may be either by any two office bearers or otherwise as
deemed fit by the members.
� Two/three Passport size coloured photographs of Office bearers.
� Seal of the SHG.
� KYC documents of the office bearers for identification and address proof.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/11,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3, 2017 page 3 item No 6.If e-
KYC of office bearers is done by the Bank, no other documentary proof other than
Aadhaar card is required.
Format of saving Bank account opening form and specimen resolution copy to be
obtained are given in Ho.Cir.225/2016.
Q.4:- What type of saving bank account should be opened by the SHG with the
Bank?
Ans: - The account can be Basic Saving Bank Deposit Account or normal Saving
Bank Account. However, it is better if normal saving bank account is opened to
avoid confusion at a later stage as there are certain restrictions on deposits,
withdrawals and balance limit in Basic Saving Bank Deposit Account.
Q.5:- Whether PAN No is required for opening of the saving bank account of
the SHG with the Bank?
Ans: - PAN No is not necessary for opening bank account of the SHG instead FORM
60 have to be furnished. As per Central Board of Direct Taxes Notification dated
6th January, 2017, the details of the SHG members have to be furnished in
column 18 of the FORM 60.
Q. 6: - Do KYC of all members are required to open saving account of SHGs?
Ans: - No. KYC verification of all the members of SHG shall not be required while
opening the Savings bank account of the SHG as KYC verification of all the office
bearers shall suffice.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/11,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3, 2017 page 3 item No 6.
Q.7: - Whether presence of all SHG members is required in the Bank branch at
the time of opening Saving Bank account of the SHG?
Ans: - No, presence of all the SHG members is not required at the time of opening
of the account of the SHG. Only office bearers’ presence is sufficient for KYC
requirement.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/11,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3, 2017 page 3 item No 6.

Q.8: - When the saving account should be opened with the Bank.
Ans: - Saving account of the SHG should be opened with the Bank within two
month of the formation of the SHG.
Q. 9: - Which date should be considered for the formation of the SHG?
Ans: -The date of resolution on formation of SHG should be considered as the first
date for all purposes (As noted in the minutes Register).
Q.10: - Does authorization letter required from Govt/Gram Panchayat to
open savings account of SHGs?
Ans: No, authorization letter from GP/BDO/Any other Govt. Department is not
required to open the saving bank account of the SHG.
Q.11: - If no dues/no objection certificate is required for obtaining Bank loan?

13
SHGs are not required to obtain No dues/no objection certificate for Bank loan.
Ref: -RBI circular No RBI/2017-18/8, FIDD.CO.LBS.BCNo1/02.01.001/20-17-18
dated July 1, 2017 item 8.1.
Q.12: - What are the eligibility criteria for the SHG to avail Bank loan?
Ans: - The following conditions should be fulfilled for availing bank loan:-
1. The SHG should be in active existence at least since the last for 6 months as
per the Books of account of SHG and not from the date of opening of SB account.
2. SHG should be practicing Panchasutras i.e. Regular Meetings, Regular savings,
Regular inter-loaning, Timely repayment and up-to date books of accounts.
3. Qualified as per the Grading norms fixed as per Ho. Cir. No. 72/2014.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 1, 2017 page 5 item No 7.2.1.
Q.13: - If the existing defunct SHGs are also eligible for Bank loan?
Ans: - The existing defunct SHGs are also eligible for credit if they are revived and
continue to be active for a minimum period of three months.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 1, 2017 page 6 item No 7.2.1
Q.14:- What is the margin and collateral security required for Bank loan?
Ans: - No margin or collateral is required up to Rs.10.00 lakh limits to the SHGs.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/11,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 3, 2017 page 8 item No.7.4.
Q.15: -Whether Bank can mark lien or block saving Bank account of the SHG
while making finance to the SHGs?
Ans: - Bank cannot mark lien against Saving Bank account of the SHG and no
deposits can be insisted upon while sanctioning loan.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.FID.BC.No.02/12.01.033/2017-18 dated July 1, 2017 page 8 item No
7.4
Q. 16: -Can branch deduct/debit amount (either from loan or saving) of the
SHG if spouse of members are defaulter of earlier schemes?
Ans: - Branch cannot debit SHG account either savings or loan if the spouse of any
member is defaulter of earlier schemes.
Q.17: - What are the processing charges and service charges of the Banks for
SHG loans?
Ans:- Our Bank is not charging loan Processing, Inspection charges and Folio
charges for SHG loans. i.e Service Charges for SHGs is “NIL . (HO. Cir No.
122/2016) dated 24.02.2016.
Q.18: - What constitutes the Corpus of the SHG?
Ans: As shown in the books of the SHG, Corpus of the SHG includes:-
� Balance in their Savings Bank Account.
� Amount held as cash with the authorized persons.
� Amount internally lent amongst the group members.
� Amount received as interest on loans to members.
� Any other contributions received by the Group like grants / donations
etc.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page 7 item No 7.2
(Last para).
Q.19: - Can earlier loan defaulters be members of the SHGs?
Ans: Members who have availed loans earlier from the financial system and could
not repay their dues can be admitted as a members of the SHG but they cannot
avail any loan from SHG out of the Bank Finance.

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Q.20: - Can such SHGs having defaulters as members avail loan from the
Banks?
Ans: -Willful defaulters of the group should not get benefits under DAY-NRLM
Scheme and group may be financed excluding such defaulters. The bank will
finance on the basis of the loan requirement of other SHG members who are not
wilful defaulters.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page 8 item No 7.5
Q.21: - Can bank deny loan to the SHG if spouse or any other member of the
family is defaulters of the Bank.
Ans: - Banks should not deny loan to entire SHG on the pretext that spouse or
other family members of individual members of SHG being a defaulter with the
Bank. Non willful defaulters should not be debarred from receiving the loan.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page 8 item No 7.5
Q. 22: - Will SHG be able to raise only one type of loan i.e. either Term Loan
or CCL?
Ans: - SHGs can avail Term Loan or CCL or both as per their requirement. In case
of need, additional loan can be sanctioned even though the previous loan is
outstanding.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page6 item No 7.2.2.
Q. 23. Is it essential for the SHG to deposit entire saving in the bank to avail
Bank Loan?
Ans: - No Bank cannot insist on depositing Savings of the members in the Bank or
take Savings as Collateral.
Q.24: - Is it mandatory for the SHG to avail loan from the bank for the
productive purposes only?
A. The loans may be used by the members for meeting social needs, high cost
debt swapping, construction or repair of house, construction of toilets and taking
up sustainable livelihood activities by the individual members within the SHG or to
finance any viable common activity started by the SHGs.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page7 item No 7.3.1
Q. 25: - What is the amount of stamp duty to be charged by the banks for loans
to SHGs?
Ans: Stamp duty is payable as per respective state Stamp duty act.
Q. 26: - Is there any penal interest charges by the bank on SHG loan accounts?
Ans: There is no penal interest for loan up to Rs.25000/- per member as loans to
SHGs are considered as Loans to Weaker Section under Priority Sector.
Q.27: -Can loan Pass Book be issued to the SHGs by the Banks?
Ans: Loan Pass Books in the Regional Languages may be issued to the SHG which
may contain all the details of the loan disbursed and terms and conditions
applicable to the loan sanctioned.
Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page9 item No 9.1
Q.28: Can a Bank sanction more than Rs.One lakh loan to the SHG in the First
Year/First Dose?
Ans: The quantum of the credit in case of Cash Credit for first time to be given to
the group shall be 6 times of the existing corpus or minimum Rs.One lakh
whichever is higher and in case of Term Loan the first dose is 6 times of the
existing corpus or minimum Rs.One lakh whichever is higher. Thus the loan
amount for the first year or fist dose may be more than Rs.One lakh.

15
 Ref:-RBI master circular on SHG bank Linkage No RBI/2017-18/10,
FIDD.GSDD.BC.No.04/09.01.01/2017-18 dated July 1, 2017 page 6 item No 7.2.2
HO Circulars:
HOC 366/2013 dated 06.07.2013 HOC 771/2013 dated 23.012.2013
HOC 85/2014 dated 03.02.2014 HOC 92/2014 dated 05.02.2014
HOC 878/2014 dated 16.12.2014 HOC 71/2015 dated 31.01.2015
HOC 343/2015 dated 26.05.2015 HOC 626/2015 dated 05.10.2015
HOC 225/2016 dated 04.04.2016 HOC 453/2016 dated 21.07.2016
HOC 572/2016 dated 14.09.2016 HOC 414/2017 dated 27.07.2017
HOC 337/2018 dated 25.05.2018 HOC 450/2018/dated 21.07.2018

2
DEENDAYAL ANTODAYA YOJANA-NATIONAL URBAN LIVELIHOODS MISION
(DAY-NULM)

1.0 Introduction: The Self Employment Programme (SEP) focuses on financial

assistance to Urban Poor – individuals or groups or Self Help Groups
(SHGs) - for setting up of gainful self-employment ventures/micro-
enterprises, suited to their skills, training, aptitude and local conditions
through credit from Bank with interest subsidy. It will further focus on
technology, marketing and other support services to these enterprises. The
underemployed and unemployed youth will be encouraged to set up
enterprises relating to manufacturing, servicing and petty business for which
there is considerable local demand. Local skills & crafts are to be encouraged.
Each Urban Local Body (ULB) should develop a compendium of such
activities/projects keeping in view skills available, marketability of products,
costs, economic viability etc.

2.0 Reservations: The women beneficiaries under SEP shall not be less than 30%. SCs
& STs must be benefited at least to the extent of the proportion of their strength in
the city/town population of poor. Provision of 3% reservation should be made for the
differently-abled persons. At least 15% of the physical & financial targets shall be
earmarked for the minority communities.

3.0 Selection of Beneficiary: The Community Organisers (Cos) and professionals

from ULB will identify the prospective beneficiaries from among the urban
poor. The community structures formed under Social Mobilization &
Institutional Development (SM&ID) component of NULM viz., SHGs and
Area Level Federations (ALFs) may also refer prospective beneficiaries to
ULB. The beneficiaries may directly approach ULB. Banks may also identify
prospective beneficiaries and send such cases to ULB.

4.0 Educational Qualifications & Training requirements: No minimum

educational qualification is prescribed. However where the identified activity
requires some special skill, appropriate training must be provided before
extending financial support. Financial assistance should be extended only
after the prospective beneficiary/ies has/have acquired the required skills
for running the proposed micro enterprise. Such training may not be
necessary if the beneficiary has already undergone training from a known

16
 institute, registered NGO/voluntary organization or trained under any
government scheme, provided requisite certificate is produced. In case the
beneficiary has acquired required skills from family occupation such cases
should be certified by the ULB before extending financial assistance.

5.0 Entrepreneurship Development Programme (EDP): In addition to skill

training as above, ULB will also arrange EDP of 3–7 days for the
beneficiaries. The EDP will have to cover basics of entrepreneurship
development such as management of an enterprise, basic accounting,
financial management, marketing, backward & forward linkages, legal
procedures, costing, revenue etc. In addition to these topics, the module
should also include group dynamics, allocation of work, profit sharing
mechanism etc for group enterprises. The module may be developed &
finalized by State Urban Livelihood Mission (SULM) supported by State Mission
Management Unit (SMMU) with the assistance of an empanelled institution
and the ULB may utilize the same institution for conducting training
programme. Such institutions can be Rural Self Employment Training
Institutes (RSETIs) or other reputed organisations/NGOs. Any cost incurred
on training of beneficiaries is to be met out of the budget of
EST&P(Employment through Skill Training & Placement) component of NULM.

6.0 Subsidy:

a) The financial assistance available to urban poor in setting up of enterprises

will be in the form of Interest Subsidy on Bank loans. Interest subsidy over and
above 7% rate of interest will be available. After disbursement of loan, the
concerned branch of the bank will send details to ULB with interest subsidy
amount as per the format given in annexure II (HOC 729/2016) every month. The
ULB will check the data and release the interest subsidy amount to the branch.
b) An additional 3% interest subvention will be provided to all Women SHGs
(WSHGs) who repay their loan promptly. This interest subsidy of 3% to
WSHGs is in addition to the regular interest subsidy available as given in
para 6 (a) above. Refer para 11 below for details of prompt repayment.

c) With effect from 01.04.2018, the claim process for interest subvention under
the scheme has been centralized and the subvention will be claimed
centrally from Head Office.

7.0 Loan Amount & other terms:

7.1 Individual Enterprise:

a) An individual urban poor desirous of setting up of an individual micro

enterprise for self-employment can avail the benefit.

b) Age: The prospective beneficiary should have attained the age of 18 years at
the time of applying for loan.

c) Project Cost: The maximum project for individual micro enterprises is Rupees
Two Lakh only.
d) Margin : As per bank’s norms applicable for the category in which the loan is
classified.

e) Loan Amount: Project cost minus margin.

17
 f) Interest Rate: As per bank’s card rate applicable for the category in which
loan is classified.

g) Security: As per bank’s norms applicable for the category in which loan is classified.

h) Loans for activities eligible for CGTMSE cover should compulsorily be covered under this t
In such cases with CGTMSE cover and loan amount less than Rupees Two lakh,
collateral security should not be taken.

i) Repayment: As per bank norms ranging from 5 – 7 years after initial

moratorium of 6-18 months.

7.2 Group Enterprises:

a) Group of Urban poor or SHGs of urban poor desirous of setting up a

group enterprise for self- employment can avail the benefit.

b) Eligibility: The group enterprise should have a minimum of 5 members with a

minimum of 70% members from urban poor families. The beneficiaries
should preferably be referred by the community structures viz., SHG/ALF
formed under SJSRY/NULM.

c) Age: All members of the group should have attained the age of 18 years at
the time of applying for loan.

d) Project Cost: The maximum project for group enterprises is Rupees Ten Lakh
only.

e) Margin : As per bank’s norms applicable for the category in which the loan is
classified.

f) Loan Amount: Project cost minus margin.

g) Interest Rate: As per bank’s card rate applicable for the category in which
loan is classified.

h) Security: As per bank’s norms applicable for the category in which loan is
classified.

i) Loans for activities eligible for CGTMSE cover should compulsorily be

covered under this guarantee scheme. In such cases of having CGTMSE
cover and as the loan amount will be less than Rupees Ten lakh, collateral
security should not be taken.

j) Repayment: As per bank norms ranging from 5 – 7 years after initial moratorium
of 6-18 months.

8.0 Margin: No Margin Should be taken for loans up to Rs. 50,000/- and for
loans ranging above Rs. 50000/- to Rs. 10 lakh, preferably 5% should be
taken as margin money and it should in no case be more than 10% of
project cost. (HOC 453/2016 dated 21.07.2016).

18
9.0 Procedure for Sponsoring of Applications: The applications will be
sponsored by ULBs. The ULBs will create awareness about SEP to the
prospective beneficiaries through mass media campaigns, IEC activities,
advertisements, City Livelihood Centers (CLCs) etc. The SULM may develop a Loan
Application Form in suitable format in consultation with SLBC which may be
utilized across the State. The ULB will complete the loan applications with
activity details, identity proof, address proof, bank account details etc and
submit to task force constituted at ULB level. The task force will interview
the prospective beneficiaries and decide about recommending or rejecting the
applications or call for additional information. The case duly recommended by
the task force will be forwarded by the ULB to branch for further processing.
The branch should process the application within a period of 15 days. As these
cases are already recommended by task force, rejection by bank branches
should be only in exceptional circumstances.

10.0 Task Force at ULB level: The Chief Executive Officer(CEO)/Municipal

C ommissioner of the ULB will be responsible to constitute the Task Force and
will be the Chairman of the Task Force. There could be more than one Task
force at ULB level depending upon the size/population of the city/town. The
ULB will forward the applications to the task force, which will be scrutinized
based on the experience, skills, viability, scope etc. Thereafter the task force
will shortlist and call the applicants for interview. After the interview, task
force, if found suitable, will recommend the proposals to banks or reject, if
found unsuitable or ask for applicant to submit further information for re-
examination on a case to case basis.

11.0 It may be noted that the identification, selection, formation and

monitoring of SHGs who are to get interest subvention would be the
responsibility of State/ULBs and banks would not be liable for wrong
identification of SHGs who get interest subvention.

12.0 RBI guidelines for prompt repayment which are as follows are to be
followed:

a) For Cash Credit limit to SHGs:

i) Outstanding balance shall not have remained in excess of the sanctioned

limit/drawing power continuously for more than 30 days.

ii) There should be regular credits and debits in the account. In any case there shall
be at least one customer induced credit during the month.

iii) Customer induced credits during a month shall be sufficient to cover the interest
debited during the month.

b) For Term Loan to SHGs:

A term loan account where all of the interest payments and/or instalments of
principal were paid within 30 days of the due date during the entire tenure of
the loan would be considered as account having prompt payment. The prompt
payment guidelines will continue to be guided by RBI guidelines on the subject in
future.

19
 13.0 The CLCs established under NULM will offer services to the micro-
enterprises such as in Establishment (licenses, certificates, registration, legal
services etc), production, procurement, technology, processing, marketing,
sales, packaging, accounting etc for long term sustainability.

CLC will also provide support in taking up feasibility/assessment studies on

market demand and market strategy for products and services of micro-
enterprises.

HO Circulars:

HOC 453/2016 dated 21.07.2016

HOC 729/2014 dated 07.10.2014

4. PRIME MINISTER’S EMPLOYMENT GENERATION PROGRAMME (PMEGP)

Prime Minister Employment Generation Programme (PMEGP) Scheme – Modification of

existing scheme guidelines

1. Working Capital Component should not be more than 40% of the Project cost for
manufacturing units and not more than 60% of the project cost for the units under
service/trading sector
2. The scoring model forms the basis for the selection of beneficiaries at agency and
DLTFC level
3. Additional Financial assistance upto Rs.1 Crore for manufacturing unit with uniform
subsidy of 15% for all categories for expanding/upgrading the existing & well
performing unit set up under PMEGP/MUDRA Schemes. For Service/trading units the
additional financial assistance would be up to Rs.25 lakhs only.
4. Trading & Transport activities are also included

Existing Guidelines Revised Guidelines

Trading Activities are a) Business/trading activities in the form of sales outlets may
not considered be permitted in NER, LWE‐affected districts and A&N Islands.
b) Retail outlets/business selling Khadi Products, Village
Industry projects procured from Khadi and Village Industry
Institutions certified by KVIC and products manufactured by
PMEGP/SFURTI units only may be permitted under PMEGP
(across the country).

c) Retail outlets backed by manufacturing (including

processing)/Service facilities may be permitted (across the
country)
d) The maximum cost of the project for business/trading
activities as above (a) and (b) may be Rs.10 lakh (at par with
the maximum project cost for service sector)
Transport Activities Transport activities viz purchase of Cab/Van, Boat/Motor
are not included Boat/Shikara etc. for transportation of tourists or general
public will be allowed. A ceiling of 10% on the extent of
projects financed under transport activities will be imposed
in all areas except NER, hilly region, LWE‐affected districts
and A&N Islands, Goa, Puducherry, Daman & Diu, Dadra

20
 Nagar Haveli, J7K, Lakshadweep or other specific areas as
may be declared by the Government.

Project cost shall For manufacturing units, working capital component should
include Capital not be more than 40% of the project cost and for units under
Expenditure and one service/trading sector, the working capital shall not be more
cycle of Working than 60% of the project cost.
Capital. However, for manufacturing units, the project cost may
include maximum capital expenditure up to Rs.25 lakhs. In
such cases, the working capital over and above Rs.25 lakh
will not be covered under subsidy.
Assistance under the An additional component namely Expanding/Upgrading the
Scheme is available existing unit set up under PMEGP/MUDRA has been added,
only for new projects wherein the units already setup under PMEGP/MUDRA and
sanctioned specifically performing very well in terms of turnover, profit making and
under the PMEGP. loan repayment will be selected for providing further
financial assistance of up to Rs.1.00 crore for manufacturing
units, through Banks with uniform subsidy of 15% by the
government for all categories. For Service/trading units the
financial assistance would be upto Rs.25 lakhs only.
The existing PMEG/MUDRA units shall be considered for up
gradation if:
• Margin Money claimed under PMEGP has been successfully
adjusted.
• First loan under PMEGP/MUDRA has been successfully
repaid in stipulated time.
• The unit is profit making with good turnover and having
potential for growth in turnover and profit with
modernization / upgrading the technology.

Categories of Beneficiary’s Rate of Subsidy

beneficiaries contribution (of (of project cost)
under PMEGP (for project cost)
up
gradation of
existing units)
All Categories 10% 15% (20% in NER
and Hill States)

Note:
(1)The maximum cost of the project/unit admissible under
manufacturing sector for upgradation is Rs. 1.00 crore.
Maximum subsidy would be Rs.15 lakh (Rs.20 lakh for NER &
Hill States)
(2) The balance amount of the total project cost will be
provided by Banks as term loan
(3)The maximum cost of the project/unit admissible under
business/service sector for upgradation is Rs. 25 lakh.

Inclusion under Identification of Beneficiaries:

The scoring model (card) as devised by IBA and being used by Member Banks for PMEGP

21
cases, will also form the basis for the selection of beneficiaries at agency and DLTFC
level. Applications which do not score more than 60 marks out of 100 marks will be
rejected with reasons and their score card sent to the applicant for rectification in
future. Only applicants scoring 60 marks and above will be sponsored to the Banks
through DLTFC.
Important points while considering loans under PMEGP:
1. Appraise the projects strictly based on both technical feasibility and economic
viability.
2. No collateral security to be insisted for loans upto Rs.10 lakh to MSE Sector as per
RBI guidelines.
3. Invariably cover all PMEGP loans upto Rs.10.00 lakhs under Credit Guarantee
Scheme.
4. Cover the eligible limits under Credit Guarantee Schemes in time and invoke the
guarantee for the loans turned to NPA within stipulated time.
5. The high incidence of NPA, wherever noticed should be brought to the notice of
BLBC/DLRC/SLBC and the assistance of sponsoring agency in recovery of loans has to
be sought.
Important Circulars on PMEGP:

HOC 351/2018 dated 02.06.2018 HOC 224/2018 dated 04.04.2018

HOC 824/2016 dated 30.12.2016 HOC 805/2016 dated 21.12.2016
HOC 495/2016 dated 09.08.2016 HOC 379/2015 dated 10.06.2015
HOC 333/2015 dated 19.05.2015 HOC 278/2015 dated 15.04.2015
HOC 31/2015 dated 10.01.2015 HOC 849/2014 dated 27.11.2014
HOC 835/2014 dated 21.11.2014 HOC 811/2014 dated 14.11.2014
HOC 759/2014 dated 23.10.2014 HOC 578/2014 dated 01.08.2014
HOC 505/2014 dated 07.07.2014 HOC 982/2008 dated 04.11.2008

1. Differential Rate of Interest Scheme (DRI)

One of the oldest Social lending schemes in force to cover the weakest of weak in the
society and a scheme where there is no subsidy component. Reserve Bank of India
stipulates that all the Banks have to achieve a level of lending 1% of their Aggregate
Net Bank Credit as at the end of previous financial year.

Eligibility: All families with a family income from all sources not exceeding
Rs.18,000 p.a. in rural areas and Rs.24,000 p.a. in other areas are eligible.

Land holding: Should not own more than 1 acre of irrigated land or 2.5 acres of
unirrigated land (Members of SC/ST are eligible for loans irrespective of land holding
subject to other criteria)

Amount of Loan: A loan of Rs.15,000 under DRI and up to Rs.20,000 for housing
purpose can be sanctioned

Margin: Nil

Rate of Interest: 4% p.a.

Security: Hypothecation of assets created out of finance

22
Insurance premium of assets financed and cost of photograph is to be borne by the
Bank. 40% of the loans are to be given to SC/STs and 66.67% should be routed through
rural/semi urban branches.

Conclusion

The Central Govt. sponsored schemes and various other schemes launched by the State
governments provide an opportunity to Public Sector Banks to play their Social
Responsibility role. Therefore, the Banks should adhere to the scheme guidelines and
should not insist on higher margins or other collaterals. The loans should be sanctioned
without any delay. For that the Bank has to take the initiative to identify the
borrowers and should not wait for the dead line for sanctioning the loans. Counseling
should be provided to the beneficiaries and they should be properly guided to benefit
from the schemes.

References:
HOC 366/2013 HOC 729/2014
HOC 982/2008 HOC 159/2009
HOC 107/2014 HOC 196/2014

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