Self Help Groups have access to multiple sources of funds as depicted below. The SHGs need to be guided and prepared to access the Mission funds they are entitled to. More significantly, the SHGs need to be guided to accessing bank credit and other financial services on a continuous basis.
Facilitating the SHGs to access all potential sources of funds and to support and guide them to utilize the funds efficiently to improve, diversify and sustain their livelihoods is the critical role that the Mission units in general and the FI professionals in particular should play. This can be done in the following manner:
The savings rate (savings per member per meeting/per month) should be enhanced, taking into account the saving potential of the members; and
Introduction of new saving products like optional/ voluntary savings apart from regular savings. Savings may also be targeted for specific purposes and emerging needs of members such as education of children, construction of houses and for meeting health emergencies
Regular internal lending and recovery will contribute to higher income from interest charges If the SHGs undertake regular internal lending and recovery of loans, the interest income would exceed the total member savings in about 8 years; and
NRLM provides the following funds to capitalize the eligible community institutions of the poor and to enable them to access external sources of finance such as bank loans.
The Mission provides for a Revolving Fund of Rs.10000 to Rs.15, 000 per eligible SHG to catalyze the process of internal lending and to enable them to meet the immediate credit needs of the members.
The Mission also provides for Community Investment Fund as a resource in perpetuity to capitalize the institutions of the poor in three forms.
The funding support from the Mission is essentially intended to act as a catalyst for the SHGs to borrow larger amounts from the banks in a gradual manner such that in about 5 to 6 years, each SHG is able to access a credit amount of Rs.10.00 lakhs. The Master circular issued by RBI on 1st July, 2017 in this regard recommends the following amounts of loans:
Cash Credit Limit (CCL): In case of CCL, banks are advised to sanction minimum loan of Rs 6 lakhs to each eligible SHGs 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:
Term Loan: In case of Term Loan, banks are advised to sanction loan amount in doses as mentioned below:
Security and Margin:
Banks are advised to work with DAY-NRLM to institutionalize a mechanism for online submission of loan application of SHGs for tracking and timely disposal of application.
Source : National Rural Livelihoods Mission