All-women SHGs can avail funds at 7% interest: RBI

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RBI has issued revised guidelines on interest subvention scheme under DAY NRLM, as received from the Ministry of Rural Development for implementation by 21 public sector banks and 19 private banks. All women SHGs will be eligible for interest subvention on credit upto Rs 3 lakh at 7 per cent per annum.

Interest subvention scheme

  • The Ministry of Rural Development, Government of India is operating a scheme namely ‘Interest Subvention Scheme under Deendayal Antyodaya Yojana – National Rural
    Livelihoods Mission (DAY-NRLM)’. The funding for the scheme will be met out of Central Allocation under DAY- NRLM.
  • This scheme is limited to Women Self Help Groups in
    rural areas only and 21 Public Sector Banks and 19 Private Sector Banks are implementing the scheme. For the year 2017-18, Canara bank has been nominated as the Nodal bank by MoRD which will operationalize the scheme through a web based platform, as advised by MoRD.
  • Besides commercial banks RRBs and Co-operative banks have been implementing the scheme regulated by NABARD.


Mission aims at creating efficient and effective institutional platforms of the rural poor, enabling them to increase household income through sustainable livelihood enhancements and improved access to financial services.


  • All women SHGs in rural areas will be eligible for interest subvention on credit upto ₹ 3 lakhs at 7% per annum.
  • The women SHGs already availed capital subsidy under SGSY in their existing credit outstanding will not be eligible for benet under this scheme.
  • CBS enabled banks can only participate in the scheme.

Additional interest subvention of 3%for prompt payment

  • The SHGs are provided with an additional 3% subvention on the prompt repayment of loans/cash credit accounts.
  • The account is considered as an account as an account having prompt payment if they satisfy following repayment criterion specied by RBI.
  • In case of Cash Credit Limit, the outstanding balance shall not have remained in excess of the limit/drawing power continuously for more than 30 days and there shall be regular credit and debits in the accounts.
  • In any case there shall be at least one customer induced credit during a month and such customer induced credit must be sucient to cover the interest debited during the month.
  •   A term loan account where all of the interest payments and/or installments of principal were paid within 30 days of the due date during the tenure of the loan would be considered as an account having prompt payment.

Role of the State Governments

  • All women SHGs from rural areas, are regarded as SHGs under DAY-NRLM and will be eligible for interest subvention on credit upto ₹3 lakhs at the rate of 7% per annum on prompt repayment.
  • This scheme will be implemented by the State Rural Livelihood Missions (SRLMs). SRLMs will provide interest subvention and the funding for this subvention will be met out of the Central Allocation and State Contribution as per the norms of Government of India.
  • For the purpose of the Interest Subvention, an account will be considered as prompt payee if it satisfies the following criterion as specified by RBI.

Meaning of Self-Help Group (SHG)

It is a village-based financial intermediary committee usually composed of 10–20 local women or men. A mixed group is generally not preferred. Most self-help groups are located in India, though SHGs can be found in other countries, especially in South Asia and Southeast Asia.

Members also make small regular savings contributions over a few months until there is enough money in the group to begin lending. Funds may then be lent back to the members or to others in the village for any purpose. In India, many SHGs are ‘linked’ to banks for the delivery of is a group which help every needy.

Need of Self-Help Group (SHG)Related image

The very existence of SHGs is highly relevant to make the people of below poverty line hopeful and self-reliant. SHGs enable them to Increase their income, improve their standard of living and status in society. It acts as a catalyst for bringing this section of society to the main stream.

Ultimately, the nation reaps the advantages of socialism.

The Government of India and various state Governments have been implementing various programmes for rural upliftment

Objectives of SHG

  • To inculcate the savings and banking habits among members.
  • To secure them from financial, technical and moral strengths.
  • To enable availing of loan for productive purposes.
  • To gain economic prosperity through loan/credit.
  • To gain from collective wisdom in organising and managing their own finance and distributing the benefits among themselves.
  • To sensitize women of target area for the need of SHG and its relevance in their empowerment.
  • To create group feeling among women.
  • To enhance the confidence and capabilities of women.
  • To develop collective decision making among women.
  • To encourage habit of saving among women and facilitate the accumulation of their own capital resource base.
  • To motivate women taking up social responsibilities particularly related to women development.
  • It acts as the forum for members to provide space and support to each other.

Advantages of financing through SHGs

  • An economically poor individual gains strength as part of a group.
  • Besides, financing through SHGs reduces transaction costs for both lenders and borrowers.
  • While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as part of an SHG cut down expenses on travel (to and from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans.
  • Where successful, SHGs have significantly empowered poor people, especially women, in rural areas.
  • SHGs have helped immensely in reducing the influence of informal lenders in rural areas.
  • Many big corporate houses are also promoting SHGs at many places in India.
  • SHGs help borrowers overcome the problem of lack of collateral.
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