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.