Self Help Group-7 , Banking Fundamentals to Know for Students.

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 Process the application  and sanction  a loan   based  on the savings in terms of

            a) Amount lying in SB A/c., plus

     b)Amount utilized in internal                            lending by  the SHG, plus

     c) Cash balance with the SHG

    The ratio of savings     :      Bank loan

                                    1        :      1

                                    1        :      2

                                    1        :      3

                                    1        :      4 

Assessment of Credit/Quantum of Loan

With the increased capability of mature SHGs (availing repeat loans)  to handle higher quantum of funds, the higher quantum of loans may be considered taking into consideration of factors such as :

v Quality of SHG as reflected in its rating score,

v Credit absorption capacity,

v Managerial ability to handle income-generating projects entailing higher outlay, 

v Risk-taking ability.

vGroup dynamics and peer pressure, etc.

SHG 2 : Revisiting the SHG Bank Linkage Programme (BLP)

  Revised instructions relating to SHG Credit linkage –

§Allowing voluntary savings

§Purpose of bank loan

§Cash Credit / Overdraft for SHGs (DFS instructions vide letter No. F.No.3/37/2012-AC dated 2nd April 2012)

§Enabling Joint Liability Groups (JLGs) within SHGs

§Improving Risk Mitigation Systems

SHG - bank linkage  (contd…)

ØMonitoring of SHG &  NGO activities and  attending   group      meeting  for  follow-up &    guidance & for promoting  Income generation    activities   & repayment of loans.

ØSubmission of statement to the    controlling authority

ØSanction of new limits (repeat  loans)  based on savings   and  demand and sanction of loans for  joint ventures (Group loaning)  

Lending norms contd...

Loan document signatories: Authorised representatives of the group.                                        

 Documentation

 (Direct loan to SHG)   :     As prescribed by RBI

a)  Inter se agreement to be  executed by all members of the SHG (To be stamped) -  

b) An application by the authorized representative of the SHG      

c)  Articles of an agreement to be executed by the authorized representative

d)  Sponsorship letter from the  NGO/SHPI if any

e)  Resolution Copy 

RBI MASTER CIRCULAR

RBI has advised that Banks may consider lending to SHGs as part of their mainstream credit operations both at the policy and implementation level.

Banks may include SHG linkage in their corporate strategy/plan, training curriculum of their officers and staff and implement it as a regular business activity and monitor and review it periodically.

Banks should report their lending to SHGs and/or to NGOs for on-lending to SHGs/members of SHGs under the new segment, viz. 'Advances to SHGs' irrespective of the purposes for which the members of SHGs have been disbursed loans.

POVERTY IS NOT TO BE SUFFERED IN SILENCE BY THE POOR,

    NOR IT IS TO BE TOLERATED BY THOSE WITH THE POWER TO CHANGE IT.

    YOU HAVE THE POWER.