FINANCING SELF HELP GROUPS SHGS | Union Bank of India

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FINANCING SELF HELP GROUPS SHGS

SHG FINANCE

Concept	Self Help Group is a homogeneous group of micro entrepreneurs with affinity among themselves, a) Voluntarily formed to save whatever amount they can conveniently save out of their earnings, b) Mutually agree to contribute to a common fund of the group; Small loans are given to the members for meeting their productive and emergent credit needs from the common fund;
Objectives	To meet the credit needs of the poor; To build mutual trust and confidence between the bankers and the rural poor; To encourage banking activity both on thrift as well as credit side in a segment of the population that the formal financial institutions usually find difficult to cover; To enable additional employment generation; To facilitate women empowerment in case of women SHGs.
Linkage Programme	Credit linkage will be normally after 06 months of successful/satisfactory operations of the SHG with the Bank.
Types of credit linkages	Direct to SHGs: Through bulk lending to Voluntary Agencies/NGOs for on-lending to group.
Purpose of the loan	The loan may be for meeting emergent requirements of the group members OR for purchase of assets/ productive and income generating activities.
Extent of Loan	Extent of Finance: First Phase: SHG with satisfactory transactions in their SB account for at least a minimum period of six months reflecting regular savings, withdrawal of internal lending & recoveries etc would be eligible for first phase of credit linkage subject to fulfilling grading norms. The quantum of credit given to the group shall be in proportion of savings/corpus fund to the loan may range from 1:1 to 1:6 depending on the assessment of SHG subject to minimum Rs.1 Lakh per group. Second Phase: SHG which conducted the previous account/dose satisfactorily for minimum period of six months would be eligible for second phase of credit linkage subject to fulfilling grading norms. SHG groups qualifying the above criteria will be eligible for loan upto 1:10 times of savings/corpus fund subject to maximum ceiling of Rs.5 lakh per group. Third Phase: SHG which has conducted the previous account/dose satisfactorily for minimum period of twelve months would be eligible for third phase of credit linkage subject to fulfilling grading norms. SHG groups qualifying the above criteria will be eligible for loan upto 1:10 times of savings/corpus fund subject to maximum ceiling of Rs.10 lakh per group. Subsequent Phases: SHG which has taken third phase and utilized the same properly and satisfactorily for minimum period of twelve months would be eligible for subsequent phases of credit linkage subject to fulfilling grading norms. SHG groups qualifying the above criteria will be eligible for loan upto 1:10 times of savings/corpus fund depending on the assessment of SHG. As per Micro Credit Plan (MCP) for assessment of limit for SHG finance.
Type of loan account	Maybe as a Term loan OR as a Cash Credit account
Security	Primary Security: Hypothecation of assets created out of Bank's finance. Collateral Security: Credit limit upto Rs.10 lacs: Nil Credit limit above Rs.10 lacs: Collateral security to the extent of 100% of loan amount is to be obtained (Any collateral security acceptable to the bank & subject to that, it should be owned by any member of the SHG). Loans sanctioned under two schemes of GOI, DAY-NRLM and DAY-NULM with sanctioned limits between Rs.10 lakhs to Rs.20 lakhs from 20-21 onwards shall be eligible for coverage under CGFMU. For NRLM scheme: please refer NRLM guidelines issued from time to time.
Margin	No margin is stipulated for loans sanctioned based on 1:4 OR 1:10 concept of savings of SHGs. However loans sanctioned to SHGs for creating any assets/ productive / income generating activity, usual margin norms has to be stipulated i.e. Up to Rs.1.60 lakh – No margin More than Rs.1.60 lakh – minimum 10% Subsidy portion in case of government sponsored schemes may be treated as part of margin.
Repayment	Repayment period which may range from 3 to 7 years.
Forms & Documents	Appropriate DPN note, Letter of continuity, Application by SHG ,copy of bye laws, Copy of proceedings /resolution, Inter -se Agreement by all members ,Articles of agreement by authorized members, ,Hypothecation agreement ,General term loan agreement, Letter of general lien /setoff, Mortgage deed, third party guarantee ,comprehensive insurance of assets ,Undertaking from borrower /Guarantor for disclosure to CIBIL and any other document stipulated in sanction.
Uniform Margin of 10% for loan above Rs.10.00 lakh and up to Rs.20.00 lakh for Women Self Help Groups (SHGs) under DAY-NRLM.
Loam Amount	Margin Requirement
For loan upto Rs.10.00 lakh	For loans to SHGs up to Rs 10.00lakh, no collateral and no margin is applicable.
For loan above Rs.10.00 lakh and upto Rs.20.00 lakh	For loans to SHGs above Rs.10 lakh and upto Rs 20 lakh, uniform margin of 10% of loan amount is applicable, no collateral 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 Rs 10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).

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TAKE OVER OF SHG FROM OTHER BANKS/FI

TAKE OVER OF SHG FROM OTHER BANKS/FI

Type of Facility	Cash Credit Limit (CCL) or Term Loan (TL) loan or Composite loan.
Finacle Scheme codes	CCSHG for Cash Credit limits RA032 and RA029 for Term loans
Objective	To strengthen the SHG portfolio of the bank. To enable Branches/offices to takeover SHG loans from other banks. To enable SHGs to avail additional advantages like low rate of interest, waiver of processing charges up to Rs.10.00 lakh for CC/OD loans etc.
Purpose of Loan	To takeover of SHG account from other bank/Financial institution on selective basis with mutual consent with minimum satisfactory credit history of 12 months since availment of loan with existing FI.
Eligibility criteria/ Takeover Norms	To gain market share, branches may be permitted for takeover of SHG loans on selective basis immediately. However, FGMOs should pursue and explore all efforts entering into MOU/Tie-up with SRLM at the earliest possible time. The maximum takeover amount per group shall be restricted to Rs.10.00 lakh. No Branch shall attempt for takeover without written approval for takeover from respective RO/FGMO. As per loan policy 2021-22, it is mentioned that “the approval of takeover norms(Without deviation or with deviation) is to be obtained from next higher authority up to RLCC-I in all the cases of takeover proposal after the proposal sanctioned by the delegate but before release of such facilities and same shall be applicable in SHG takeover also. SHGs which have availed at least 1^st dose of credit and completed the same successfully and eligible for 02^nd or subsequent dose of credit with minimum 12 months of satisfactory credit history for existing loan irrespective of dose of credit at another bank are only eligible for takeover. SHGs which have completed 18 months from date of formation as per books of record. SHG should submit resolution for takeover of SHG loan with specific reason. Obtention of NOObjection Certificate from existing bank is waived. State Rural livelihood Mission-Jeevika (SRLM)/NABARD/Non-Governmental organization (NGO)/Village organization (VO) etc. shall recommend for the takeover of loan facility clearly citing the reason for takeover and they must confirm the veracity of the group. Statement of account of the existing bank for preceding minimum 12 months is to be obtained and shall be verified to assess the quality of operations with the existing bankers. While scrutinizing the Bank statement, among other things, certain parameters to be looked into as stated below: i. Cheque returns, if any ii. Frequent cash withdrawals, if any; iii.Frequent overdrawing / excess if any. In case of adverse observation, if any, suitable justification should be provided SHG groups shall be rated as per existing NABARD grading norms and only A and B ratedSHGs are eligible for credit linkage. In lieu of credit report branches shall obtain the existing loan account statement and verify carefully whether repayment done properly or not, cheque bounce if any and ascertain the satisfactory repayment history of the group. In addition to this, Branches shall obtain recommendation letter for takeover from SRLM /NABADRD/NULM/NGOetc. The account should have been a standard asset in the books of other bank/FI during the preceding minimum 12 months period. Customer due diligence of all the members of SHG shall be undertaken by branch/office. The NPA percentage under SHG portfolio of the Branch proposing for takeover should not be more than 2 % of outstanding of SHG loans. SHGs are maintaining books of accounts like meeting register, saving register, loan register etc. scrutiny of same will be suffice for loan eligibility hence applicability of Financial ratios has been waived for SHG loans. CIC check is to be mandatorily done for secretary and president/authorised signatory of SHG. Loan account to be regular with previous Bank/ FI with no overdue. Takeover norms to be applicable to SHG which have closed loan account with other bank and approached our bank/branch for new loan within a period of 03 months. Sanction letter from previous Bank / FI to be obtained and held on records. The term loan proposed to be taken over should not have been rephased by the existing Bank/Financial institutions barring Covid restructuring as per RBI guidelines. Letter from Bank / FI for release of charge on security, if any to be obtained. The SHG loans will be given for onward lending to individual members of group for economical/consumption purpose and there is no implementation of project hence this has been waived for SHG finance. Apart from above all existing terms and condition applicable to SHG loans as per IC 1953-2020 dt.21.03.2020 and IC No.02591 -2021 dt.28.04.2021 and other circulars issued from time to time.
Quantum of Loan amount	The maximum takeover amount shall be restricted to Rs.10.00 lakh per group. Cash Credit:- Eligible loan amount to be arrived as per existing NRLM guidelines only on the basis of dose/linkage of credit and not on the basis of Age or date of formation of SHG.Previous credit linkage shall be considered for arriving the dose. The loan as per DAY-NRLM guidelines shall be arrived as given below:- • DP for Second Year: 8 times of the corpus at the time review/enhancement or minimum of ₹2 lakh, whichever is higher • DP for Third Year: Minimum of ₹6 lakh based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit history. • DP for Fourth Year onwards: Above ₹6 lakh, based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit History. In case of Cash Credit/Overdraft loan, Minimum 12 month’s gap between two consecutive doses of credit shall be ensured so as to comply with NRLM guidelines. For instance, if an account of SHG who has completed 10 months after availing 2nd dose of credit with the existing bank, shall be eligible for availing 3rd dose of credit after completion of 12 months from 2^nd linkage (i.e. After 2 months after takeover by our bank.) The Branch may be permitted to sanction credit limit as per the eligibility of the group subject to a maximum of Rs.10.00 lakh under takeover which are eligible in terms of grading and maturity as per DAY-NRLM guidelines. Term Loan: The residual period should be in line with the original repayment schedule but however the remaining leftover period should be at least 12 months. In case of Term Loan, the loan amount should not be more than outstanding balance. Any further enhancement in loan amount should be in the form of Cash credit loan/Term loan as decided by borrowal groupas per existing NRLM guidelines. Eligible loan amount to be calculated based on doses as mentioned for CC limits.
Security	For loans to SHGs up to Rs. 10.00lakh, 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.
Sanctioning Authority	As per loan policy 2021-22, it is mentioned that “the approval of takeover norms(Without deviation or with deviation) is to be obtained from next higher authority up to RLCC-I in all the cases of takeover proposal after the proposal sanctioned by the delegate but before release of such facilities and same shall be applicable in SHG takeover also. As per delegated lending authority upto a loan limit of Rs.6.00 lakh within which operating Drawing Power to be maintained as per DAY-NRLM guidelines. For loan limit above Rs.6.00 lakh, next sanctioning authority within which operating Drawing Power to be maintained as per DAY-NRLM guidelines. Any enhancement of drawing power after takeover as per DAY-NRLM guidelines shall be allowed at Branch level as per existing delegated lending powers as per eligibility of the group. The SHG loan account shall be processed through LAS module to ensure compliance of all sanction terms and conditions.
Rate of Interest	As applicable to SHG loans from time to time. Refer IC-02281 dt.27.10.2020 and circulars issued from time to time.
Margin	Nil
A/c labeling	Branches/offices shall label takeover account with TOSHG –Takeover of SHG loan label in Finacle to have proper MIS. The provision of account label is provided in SENT to CBS menu in LAS.
Interest Subvention	Women SHGs are eligible for interest subvention for a loan outstanding balance of Rs.3.00 lakh based on WAIC (Weighted Average Interest Charged). Branch/RO to obtain details of subsidy availed/interest subvention availed/to be availed by group under DAY-NRLM/SRLM/DAY-NULM scheme etc. SHG should submit the self-declaration to branch for obtaining the interest subvention from existing bank for eligible period till takeover to new loan account after takeover in coordination with agency implementing the interest subvention scheme. From the date of takeover respective branch to claim subsidy for eligible accounts under DAY-NRLM/SRLM/DAY NULM or any other such scheme based on eligibility of SHG loan account. Branch should provide new loan account to existing bank for crediting the eligible subsidy amount if any. In case where previous interest subvention claim is pending with the existing/previous Bank, then the existing/ previous bank has to claim interest subvention amount for eligible period up to their association with SHG and with the help of SRLM, the subvention amount shall be transferred to the new operative account of SHG with our Bank duly coordinating with our Bank.
Repayment	Branch shall provide appropriate repayment period in negotiation with group which may vary from 03 to 7 years as per DAY-NRLM guidelines. For CC limits interest shall be repaid as and when debited. Loan to SHGs has to be repaid normally in regular monthly installment or as determined at the time of sanctioning the loan based on local practice, activities undertaken by SHG members. Loans from SHG to members has to be repaid by members in appropriate installment which may be daily, weekly, market days, fortnightly/monthly etc based on the decision taken by the SHG.
Monitoring of takeover SHGs	Branches to monitor the performance of taken over SHGs loans and need to submit report on quarterly basis to Regional offices and if any adverse performance is observed in any of the Branch by RO, the takeover of loans for such branch shall be approved by Regional office. FGMOs/ROs should review the performance of SHG takeover scheme quarterly basis and need to put note to concerned FGMO/RO head for information and action. FGMO/RO to ensure that NPA under SHG portfolio should not be more than 2% of balance outstanding for any of the branch which have undertaken takeover of SHG loans. Branches to attend the meeting of group at regular interval and ensure group dynamics/utilization of loan amount.
Documentation	As applicable to SHG loans.
Service Charges	As applicable to SHG loans.

Deendayal Antyodaya Yojana-National Urban Livelihood Mission (DAY-NULM)

Ministry of Housing and Urban Affairs (MoHUA) Govt. of India is implementing Deendayal Antodaya Yojana-National Urban Livelihood Mission (DAY-NULM) since 24^th Sept 2013 in all district headquarters and all the cities with population of 1.00 lakh or more.

The Self Employment Program (SEP) of NULM focuses on providing financial assistance to individuals/groups including street vendors/hawkers of urban poor for setting up gainful self-employment ventures/ micro-enterprises, suited to their skills, training, aptitude and local conditions. The programme also supports Self Help Groups (SHGs) of urban poor to access easy credit from bank and avail interest subsidy on SHG loans.

The loans under SEP programme of DAY-NULM will be provided in three categories as follows: -

Scheme	Individual enterprises (SEP-I)	Group enterprises (SEP-G)	SHG Bank Linkage
Eligibility	An urban poor individual beneficiary desirous of setting up an individual micro-enterprise for self-employment	A Self Help Group (SHG) or members of an SHG constituted under DAY-NULM or a group of urban poor for self-employment can avail benefit of subsidized loans under this component from any bank. The norms/ specifications for group based micro-enterprise loans are as follows: The group enterprises should have minimum of Three (3) members with a minimum of 70% of the members from urban poor families. More than one person from the same family should not be included in the same group.	Group must be in existence for atleast 06 months and following panchasutras. Group is qualifying the grading norms.
Age	The prospective beneficiary should have attained the age of 18 Years at the time of applying for loan.	All members should have attained an age of 18 years at the time of applying loan.	All members should have attained an age of 18 years at the time of applying loan.
Project Cost/Loan Eligibility	Maximum Rs.2.00 lakh	The group will be eligible for a maximum loan of Rs. 2 lakh per member or Rs. 10 Lakh per group, whichever is lower.	SHGs may be sanctioned Savings Linked Loans (varying from a saving to loan ratio of 1:1 to 1:4) after due assessment or grading by banks. However, in case of matured SHGs, loans may be given beyond the limit of four times the savings as per the discretion of the bank.
Margin	Loan Up to Rs.50000-No margin Loan above Rs.50000-Preferably 5%, should not be more than 10% in any case.	Loan Up to Rs.50000-No margin Loan above Rs.50000-Preferably 5%, should not be more than 10% in any case.	No Margin for loan sanctioned based on 1:4 concept of Saving of SHGs. Loan sanctioned to SHGs for creating any assets/productive/ income generating activity usual margin norms as below:- Loan upto Rs.1.60 lakh-Nil Loan above Rs.1.60 lakh-Minimum 10%
Security	Primary Security: - Hypothecation of asset created out of Bank finance. Collateral security: - No collateral security required.	Primary Security: - Hypothecation of asset created out of Bank finance. Collateral Security: - No collateral security is required.	Primary Security: - Hypothecation of asset created out of Bank finance. Collateral Security: - Loan upto Rs.10.00 lakh-Nil Loan above Rs.10.00 lakh- Collateral security has been waived for loans above Rs.10.00 lakh and up to Rs.20.00 lakh under DAY-NULM for eligible activities which can be covered under CGFMU. CGFMU fee shall be borne by SHGs. Detailed procedure for covering the SHGs for eligible activities under CGFMU has been already shared vide IC No. 02754-2021 dated 27.08.2021. For accounts not eligible to be covered under CGFMU, collateral security to the extent of 100 % of loan amount to be obtained as per existing guidelines.
Guarantee Coverage (CGTMSE/ CGFMU)	Bank can cover the loan under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) setup by Small Industries Development Bank (SIDBI) or any other appropriate guarantee fund for the purpose of availing guarantee cover for SEP loans as per the eligibility of the activity for guarantee cover.	Group enterprises loan (Other than SHGs) can be covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) setup by Small Industries Development Bank (SIDBI) or any other appropriate guarantee fund for the purpose of availing guarantee cover for SEP loans as per the eligibility of the activity for guarantee cover.	SHG loan above Rs.10.00 lakh can be cover under Credit Guarantee Fund for Micro Units (CGFMU).
Interest Subsidy	The difference between 7% p.a. and the rate of interest charged by the bank will be provided to beneficiaries under DAY-NULM as interest subsidy. Interest subsidy will be given only in case of timely repayment of loan.	The difference between 7% p.a. and the rate of interest charged by the bank will be provided to beneficiaries under DAY-NULM as interest subsidy. Interest subsidy will be given only in case of timely repayment of loan.	The difference between 7% p.a. and the rate of interest charged by the bank will be provided to beneficiaries under DAY-NULM as interest subsidy. Interest subsidy will be given only in case of timely repayment of loan. An additional 3% interest subvention will be provided to all Women Self Help Groups (WSHGs) who repay their loan in time.
Takeover of Loans	Not allowed	Not Allowed	Allowed for above Rs.2.00 lakh and upto Rs.20.00 lakh

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TAKE OVER OF SHG FROM OTHER BANKS/FI

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