Financing to Self Help Groups

Type of facility

Cash credit and Term Loan

Purpose

I. The loan amount would be distributed among members based on the MCP prepared by the SHGs. The loans may be used by members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihoods or to finance any viable common activity started by the SHGs.

II. In order to facilitate use of loans for augmenting livelihoods of SHG members, at least 50% of loans above ₹1 lakh, 75% of loans above ₹4 lakh and at least 85% of loans above ₹6 lakh should be used primarily for income generating productive purposes. MCPs prepared by SHGs would form the basis for determining the purpose and usage of loans.

Eligibility

I. SHGs should be in active existence for at least 6 months as per their books of accounts (and not from the date of opening of S/B account).

II. SHGs should be practicing ‘Panchasutras’ i.e., regular meetings, regular savings, regular inter-loaning, timely repayment and up-to-date books of accounts. 

III. SHGs should qualify as per grading norms fixed by NABARD.(Annexure-7) As and when the federations of the SHGs come into existence, the grading exercise may be done by the federations to support the banks

IV. The existing defunct SHGs are also eligible for credit if these are revived and continue to be active for a minimum period of three months.

Limit/Loan Quantum

Emphasis is laid on the multiple doses of assistance under DAY­-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.

SHGs may avail either Term Loan (TL) or a Cash Credit Limit (CCL) or both based on their requirement. In case of need, additional loan may be sanctioned even though the previous loan is outstanding, based on the repayment behavior and performance of the SHG.

A. Cash Credit: -

• Minimum loan of Rs. 6 lakhs to each eligible SHG for a period of 3 years with a yearly drawing power (DP). The drawing power may be enhanced annually based on the repayment performance of the SHG.
  The drawing power may be calculated as follows: -

Fourth year onwards: Above Rs.6 lakhs, based on the MCP prepared by SHG and appraised by the federations/support agency and the previous credit history

B. Term Loan: -

• Loan amount in doses as mentioned below:

Fourth dose onwards: Above Rs.6 lakhs, based on the MCP prepared by SHG and appraised by the federations/support agency and the previous credit history

(Corpus is inclusive of revolving funds, if any, received by the SHG, its own savings, interest earned by the SHG from on-lending to its members, income from other sources, and funds from other sources in case of promotion by other institutes/NGOs.)

Margin and Security

1. For loans to SHGs up to ₹10.00 lakh, no collateral and no margin will be obtained. No lien should be marked against savings bank accounts of SHGs and no deposits should be insisted upon while sanctioning loans.
2. For loans to SHGs above ₹10 lakh and up to ₹20 lakh, no collateral should be obtained, 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 ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).
3. For loan to SHGs above ₹10 lakh and up to ₹20 lakh, a margin not exceeding 10% of the loan amount exceeding ₹10 lakh may be obtained as per the bank’s approved loan policy.

Rate of Interest

For Single SHG-

1. DAY-NRLM- Women SHGs

   Limit	Proposed ROI
   Up to Rs.3 Lakh	@7.00% p.a. (where interest subvention is available from Central Govt.)
   Above Rs.3 Lakh and up to Rs.5 Lakh	@ 1 Year MCLR P.A. (where interest subvention is available from Central Govt.)
   Above Rs.5.00 Lakh	@1 Year MCLR + (0.50% BSS) + 1.50 % P.A.

2. Other Than DAY-NRLM Women SHGs- 1 Year MCLR + (0.50% BSS) + 1.50 % P.A.
3. For Federations / NGOs -1 Year MCLR + (0.50% BSS) + 1.50 % P.A.

Repayment

a. The first dose of loan may be repaid in 24-36 months in monthly/quarterly instalments.

b. The second dose of loan may be repaid in 36-48 months in monthly/quarterly instalments

c. The third dose of loan may be repaid in 48-60 months based on the cash flow in monthly/quarterly instalments.

d. From the fourth dose onwards loans may be repaid between 60-84 months based on the cash flow in monthly/quarterly installments.