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'ASHA', a Unique Product for finance to SHGs
- SHG is a small group of rural poor, who have voluntarily come forward to form a group for improvement of the social and economic status of the members.
- Normally SHGs are informal groups (unregistered).
- The concept underlines the principle of Thrift, Credit and Self Help.
- Members of SHG agree to save regularly and contribute to a common fund.
- The members agree to use this common fund and such other funds (like grants and loans from banks), which they may receive as a group, to give small loans to needy members as per the decision of the group.
Needs of SHGs:
The rural poor are incapacitated due to various reasons, such as; most of them are socially backward, illiterate, with low motivation and poor economic base. Individually, a poor is not only weak in socio-economic term but also lacks access to the knowledge and information, which are the most important components of today's development process. However, in a group, they are empowered to overcome many of these weaknesses. Hence, there are needs for SHGs, which in specific terms are as under:
- To mobilize the resources of the individual members for their collective economic development.
- To uplift the living conditions of the poor.
- To create a habit of savings.
- Utilization of local resources.
- To mobilize individual skills for group's interest.
- To create awareness about rights.
- To assist the members financially at the time of need.
- Entrepreneurship development.
- To identify problems, analyzing and finding solutions in the group.
- To act as a media for socio-economic development of the village.
- To develop linkages with institutions of NGOs.
- To organize training for skill development.
- To help in recovery of loans.
- To gain mutual understanding, develop mutual trust and self-confidence.
- To build up teamwork.
- To develop leadership qualities.
- To use as an effective delivery channel for rural credit.
Structure and Size of SHGs:
- The ideal size of an SHG is 10 to 20 members.
- The group need not be registered.
- From one family, only one person can become a member of an SHG.
- The group normally consists of either only men or only women.
- Women's groups are generally found to perform better.
- Members should be homogenous i.e. should have the same social and financial background.
- Members should be between the age group of 21-60 years.
- Members should be from rural poor family.
A family will be termed poor if it satisfies at least 05 or 06 of the followings traits:
- The family does not have agricultural land / homestead land.
- The main earner is an agricultural labourer / manual worker / rural artisan.
- The family has no house / possesses one room kutcha house / stays in someone else's house.
- There is a permanently ill / disabled member in the family.
- The children in the family do not go to the school and/or there are illiterate elders, in the family.
- The family regularly (in certain part of the year) borrows from the money lender.
- They eat less than two meals a day at least in some months of the year.
- They belong to Scheduled Castes / Scheduled Tribes.
- It is a woman headed family.
- There is a child labour / seasonal migrant labour in the family.
- The family generally has food grain stock for not more than one month's consumption.
Functions of SHGs:
To develop a group into a well-managed Self Help Group, the members should evolve rules and regulations, which are to be adopted, after discussions with all the members for compliance in full.
- The group should meet regularly ideally: the meetings should be weekly or at least monthly.
- Compulsory Attendance: Full attendance in all the group meetings will make it easy for the SHG to stabilize and start working to the satisfaction of all.
Membership register, minutes register etc. are to be kept upto date by the group by making the entries regularly.
- Fixed day for meetings: The group should have a fixed day or date for the meetings.
- Meeting place: Initially the group should fix a common place to conduct the meetings. In course of time meetings may be arranged in the residence of the members by rotation.
- Savings should be deposited by all the members in the meeting itself.
- No interest will be paid to the members for their money with the group.
- The members will not be encouraged to adjust their savings amount against their loan due to the Group. Only at extreme circumstances the Group shall consider to adjust.
Keeping of accounts:
- Simple and clear books for all transactions are to be maintained.
- If no member is able to maintain the books, the SHG may take outside help.
- All registers and account books should be written during the course of the meeting.
Books to be maintained by an SHG:
Minutes Book: The proceedings of meetings, the rules of the group, names of the members etc. are recorded in this book.
Savings and Loan Register: Shows the savings of members and that of the group as a whole separately. Details of individual loans, repayments, interest collected, balance etc. are entered here.
Cash Book: Details of all receipts and Payments are recorded.
Members Pass books: Individual members' pass books in which individual's savings and loan balance outstanding is regularly entered.
Major functions of an SHG:
Savings and Thrift:
- All SHG members regularly save a small amount. The amount may be small, but savings have to be regular and continuous habit with all the members.
- SHG members take a step towards self-dependence when they start small savings. They learn financial discipline through savings and internal lending.
- The SHG should use the savings amount for giving loans members.
- The purpose, amounts, rate of interest, schedule of repayment etc. are to be decided by the group itself.
- Proper accounts are to be kept by the SHG.
Benefit for the Bank:
- Very small amounts of deposit by the poor people fetch good low cost deposit with the help of collective effort of the group.
- Helps in reduction of large no. of small deposit and loan accounts. It saves transaction cost and time.
- Committed group members help in generation of moral pressure for better repayment.
- SHG provides good business opportunities to the Bank.
- Finance to SHG comes under Priority Sector.
- Social commitment of Banks is fulfilled by lending to SHG.
- Scope for 100% refinance from NABARD.
A SHG will be allowed to open Savings Bank Account with our Branches subject to fulfillment of the following.
- A resolution is passed by the Group indicating the Name & Style under which such account is to be opened, the authorized operators, and the mode of operation of such accounts.
- KYC norms for all the members are fulfilled.
The uniqueness of the scheme lies in the fact that credit linkage is done simultaneously at the time of opening of Savings Account. A credit limit, assessed in the manner illustrated below, is sanctioned in favour of the group at the time of opening of Savings Account. The actual disbursement of fund under the sanction will be regulated as per the drawing power to be calculated through drawing power register illustrated below.
Assessment of Credit Limit:
The credit limit under the scheme for the next 36 months is assessed as follows.
If X is the number of members and Y is the amount of deposit per member/per month, then the Credit limit for the 1st 36 months will be Rs 10000xX or 300XY whichever is greater.
Computation of Drawing Power within the Credit limit:
||Permissible Limit under the Scheme
||At the 1st credit link upto 12 months
||12XY or 2 times of the actual corpus at the time of review whichever is lower subject to the concerned groups obtaining pass mark in the gradation exercise but subject to minimum Rs 2000/- per member.
||At the end of 12 months upto 18 months
||48XY or 4 times of the actual corpus at the time of review whichever is lower but subject to minimum Rs 4000/- per member.
||At the end of 18 months upto 24 months
||108XY or 6 times of the actual corpus at the time of review whichever is lower but subject to minimum Rs 6000/- per member.
||At the end of 24 months upto 30 months
||192XY or 8 times of the actual corpus at the time of review whichever is lower but subject to minimum Rs 8000/- per member.
||At the end of 30 months upto 36 months
||300XY or 10 times of the actual corpus at the time of review whichever is lower but subject to minimum Rs 10000/- per member.
- Assessment of credit limit for the Groups which have matured for a period more than 36 months having satisfactory transaction history and in house rating is now delinked from the corpus stipulation, subject to maximum Rs 30000.00 per member, depending upon the groups' credit absorption capacity, risk taking ability, maturity and Bank’s comfort level vis-á-vis satisfaction of the Branch Manager.
- In case of project finance to a group which have matured for a period more than 36 months having satisfactory transaction history and in house rating, where tangible assets, both movable and or immovable( other than bookdebts), are to be created for sustainable flow of income to the group members, the matching loan component per member in the group can be enhanced to Rs 50000.00, subject to maximum Rs 500000.00 per group. The repayment schedule will depend upon the mode of credit delivery i.e. term loan, working capital or composite, in compliance to the test parameters indicated in the lending policy. The credit decision will be contingent upon compliance with the benchmark parameters as indicated in the lending policy.
- The account should be reviewed at the interval of every 6 months. The drawing power should be fixed and higher corpus-credit ratios (as depicted in the table above) may be allowed at the time of such review depending upon the corpus of SHG and considering credit absorption capacity and risk taking ability, repayment capacity and ability of the individual members etc. While allowing credit limit to individual SHG, the deposit kept in the SB A/c is not be withheld as security. The SHGs are at liberty to withdraw fund from their SB A/C as and when required.
- Loan should be sanctioned in the name of the Group and not in the name of individual members.
- Group corpus will include the balance in SB Account, outstanding balance in the members' loan ledgers (loan extended out of balance in the SB account of the group only and not out of Bank loan), cash held by authorized person(s) and any other contribution received by SHG as grant, donation and fund received in the form of subsidy.
- Credit facility will be in the form of Cash Credit/Overdraft depending upon the productive activity undertaken.
Loan documents are to be executed by the Groups any time between the date of sanction and the date of availment of fund (Commencement of actual drawal) for the full amount of Limit sanctioned.
The following documents are required to be executed.
At the outset resolutions are required to be adopted by the groups indicating the maximum amount of loan resolved to be taken, the repayment schedule as resolved, maximum individual limit, interest rate to be charged by the groups to the members and the names of the authorized signatories who are empowered to sign in all the loan documents so as to bind all the members, jointly and severally.
- Demand Promissory note.
- Inter-se agreement to be executed by the members of the SHG in all cases where loan is given to SHG directly.
- Articles of agreement for financing SHGs.
- Letter of continuity.
- Copy of Resolution of the SHG for granting loan to member and authorising the signatories of execution of documents.
- Hypothecation agreements/depending upon nature of activity.
- Sanction letter duly accepted by the group.
- Vernacular confirmation.
Requirement of paying stamp duty on loan documents executed by the SHGs have been exempted by the Government of West Bengal. However Demand Promissory note is always to be stamped.
Rate of Interest:
The applicable rate of interest will be fixed in terms of the extant guidelines of the Bank issued from time to time. At present interest rate is 10.50% p.a at monthly rest.
The loan under the scheme is eligible for interest subsidy in terms of the guidelines issued by the Bank vides Circular No: CREDIT/222/2009 dated 19.08.2009.
Review of the Account:
As per normal banking practice, every credit facility is to be reviewed annually. However the drawing power is to be calculated at 6 months interval.
Reporting - Activity Code for SHG Credit Linkage:
- Activity code numbers 810 has been allotted for lending under BSR.
- Code number 67 to cover lending to SHG under LBR-2.
Migration of the existing SHGs into the fold of'ASHA':
The existing SHGs with the branches are to be brought into the fold of 'ASHA' in a phased but time bound manner as follows.
- SHGs which have not yet been credit linked but only deposit linked should immediately be brought under'ASHA'with instant sanction of credit limit in compliance with the foregoing guidelines. Drawals in the account will also be governed by the guidelines prescribed in this circular.
- SHGs which stand already credit linked must be reviewed and credit limit be re-fixed in line with the guidelines prescribed as aforesaid. Thereafter drawal in the account will be governed by the guidelines prescribed in this circular. If, in course of migration to'ASHA'it is found that present outstanding balance in a SHG A/C is higher than what it should be under'ASHA', re-fixing of limit should be deferred till the corpus becomes commensurate to the present outstanding balance in terms of guidelines under'ASHA'. As and when corpus becomes commensurate to the present outstanding balance in terms of guidelines under ‘ASHA’, the SHG should immediately be migrated to'ASHA'and thereafter should continue to be governed by the guidelines under'ASHA'.
Please contact your nearest BGVB branch for additional information.
Terms & conditions apply.