NEED FOR THE STUDY

To have an idea of changes that is taking place in this fast growing competitive market. There is
a definite requirement to study how microfinance procedure and techniques are adopted for the
SHGs in India by the organization . SBI is fast growing in this form of business. there are many
other service providers offering MICROFINANCE Services. So there is definite need to know
about its competitors and their service in details.

OBJECTIVES
The primary objective of present study is to focus on financial linkages of banks/state Bank
of India with self Help Groups in Andhra Pradesh.

The following are the objectives of the study :

a. To study the Micro Finance System in India

b. To study the formation and functioning of Self Help Groups

c. To study the financial linkage of State Bank of India with SHGs in visakhapatnam
District of Andhra Pradesh

Summary
The first chapter of this projects deals with the introduction of the financial
planning and its need and objective and limitations.

 SHGs are the most effective way for financing because there is a
optimistic return .

 SHGs are small groups generally formed by the ladies

 The members of SHGs work as a team

The second chapter of this project is over view of the company like company’s
history, location, activities etc.

 SBI is the largest,oldest,and highest profit making bank of india

 It was formed in the year 1955 as “Imperial bank of India”

 The authorized capital of SBI is Rs. 1,000 Crore. As on 31-03-2003, the

issued and paid capital is Rs. 526.30 crore with 7.11 lakh shareholders

 It has 9 subsidiaries , 7 associate banks , 3 wholly owned foreign foreign

subsidiaries , and 2 joint ventures

The third chapter of this project is deals with the theoretical frame work , how an
SHG is formed by the organization and being financed is explained here .

 The poorest of the poor are targeted and formed into a group

 They are trained that how to raise money and how to utilize and also how
to repay it .
  Their performance is assess by the checklist table as shown in the chapter.

The fourth chapter of this project is deals with the Analyzing and interpretations
requirements of microfinance

 financing to the SHGs is a good business for the financial institutions

because there is 100% return.

 It gives 100% return because SHG is a group activity and if any one from
that group is a defaulter then other group member pressurize him to pay
the money otherwise they will also face the problems .

 The states falling under this category are Andhra Pradesh (75,939 new
SHGs financed during 2002-2003), followed by Tamil Naidu (29,943),
Karnataka (81,413),Orissa(11,665), uttar Pradesh(11,490),
Maharashtra(9,151) and West Bengal(8,404).

 State Bank of India as a leading bank in the country as so far financed

MORE THAN 90,000 SHGs in the Country 80,000 SHGs in the country with
an outlay of Rest 246.76 core.
FINDINGS
 Due to illiteracy many rural people are unable to know the benefits
of bank.
 In rural areas many people rely only on crop and gold loans they
don’t use the other loans.
 Micro Finance is a facility of providing credit to poor people for self –
employment projects that generate income levels and improve their
living standards.

 Generally the groups which are provided with micro finance are
basically formed as self managed thrift and credit groups.

 The government of India is extending its full support for full micro
finance through reserve bank of India and its agency, NABARD.

 The Micro financing system in India is actually extended through

Government Agencies, DRDA and non government organizations.

 Three different models of credit linkage between self Help groups and
banks are:

i) Self Help Groups formed and financed by Banks without any mediation
 ii) Self Help Groups formed by Non government Organizations and other
formal agencies and financed by banks.

iii) Self Help Groups financed by Banks though financial intermediaries.

 In, India as at the end of March 2009 8,09,355 groups were extended credit
facilities of Rs 24590.22 cores by Banks ie., Commercial Banks, Regional
Rural Banks and Cooperative banks. Out of total loans 58% are granted by
commercial Banks especially Public sector Banks.

 State Bank of India has occupied first position in kalahandi district of Orissa
by providing finance.

 State Bank of India has 87 branches spread over rural and semi urban areas
of kalahandi district of Orissa. Right from the inception of the concept of
micro Finance, the bank is actively participating in finance to Self Help
Groups.

SUGGESTION

 Regular up gradation of the SHGs knowledge and skill is required .

 Communicate with simple and with the local language with the SHGs.

 Reach to the interiors also for business expansion.

 Give them proper guidance about the business they will do.

 Regularly interaction with them is required.

 Focus more on the um developed areas.

 Motivate them for working sincerely.

 Make them understand how to do the regular meetings

 Attract them for the accumulated savings

 Give them various offers in the festive time especially at the time of any
local festival .

 Concentrate mainly on women because ladies always saves the money and
run the business reasonably good as compared to the men

 Arranging many awareness camps etc. for the poor people

 CONCLUSION
The poverty has always been the primary concern of government of India.
As a poverty alleviation programme the Micro Finance system was initiated by
Reserve Bank of India in early 90s. Micro Finance is a system of extending small
loans to poor people for self employment generation to improve their living
standards.

Formation of Self Help Groups is part of Micro Finance proramme.

Homogeneous groups of rural poor join together to form as thrift and self managed
credit group. The members of the groups are encouraged to make voluntary thrift
on regular basis and these pooled resources are used for the purpose of internal
lending among the needy members. Once these groups show their matured
financial discipline and behavior, banks are linked to these groups to extend
finance to improve their corups. The concept of self and mutual help coupled with
financial discipline brought in a paradigm shift to the lifestyles and livelihood of
the members of the group.

The Self Help Group and Bank linkage for finance, started in the year 1992,
moderately with 255 groups now reached into a massive 8,09,355 by the end of
March 2002 with a financial outlay of Rs.24590.22 cores
 Micro Finance turned out to be the only economic programme that aimed at
the improvement and upgradition in the welfare and economic conditions of the
poor people.

The success of the Micro Finance system prompted many state Governments
to come out with several packages of grants and economic assistance to the groups.

State Bank of India, being the largest Bank in the country is strongly
associated with the micro Finance system since beginning and stands first in the
group formation as well as finance to the groups.

The participation of the Bank in anugul district of Orissa is equally

commendable. SBI has so far financed 12,311 self Help Groups in the district with
Rs2390.44 lakhs.

State Bank of India has followed a rigorous appraisal system in selecting the
groups for finance as laid down by NABARD. A checklist for selection of SHG by
allotting marks is being followed. It is ensured that each SHG has a membership of
10 to 20 with homogeneous background and is functioning well for a period of at
least six months.

It is further ensured that the groups is maintaining sound financial discipline

in thrift and credit activity and it has not come into existence only for the sake of
grants and loans.

The purposes for which the group will lend to the members are left to the
common wisdom of the group. However, the groups are strongly encouraged to use
Bank Loan for production purposes. To start with, the loans sanctioned are in
proportion to the savings mobilized by the group. Initially the proportion of loan to
savings is 2:1 and subsequently increased to 4:1. On an average, each group gets
Rs1,00,000/- as fresh finance and the loan amount gets doubled at the time of
repeat finance. The loans are given without any collateral security and at interest
rate of 10% P.a under priority sector lending.

The Micro Finance to self Help Groups is the best poverty alleviation
programme ever introduced by the Government of India. For the banks, finance to
SHGs is one of the most viable banking propositions in their priority sector
lending,

With more then 8.8 million poor households accessing credit through 18.095
branches of the formal banking system under this programme, it is already the
world’s largest micro finance programme in terms of outreach.