Priority Sector

1. Objective
 

i.

To evolve supplementary credit strategies for meeting the credit need of the rural poor.

ii.

To encourage banking activities – both on thrift as well as an credit portfolio.

iii.

To build mutual trust and confidence amongst the group members as also between the bankers and rural poors / groups.
 

2. Membership
 

The membership of the group should be restricted between 10 to 20. Only one person of a family either male or female can be the member of an SHG. The Group should preferably be economically and socially homogeneous, covering people below poverty line, above poverty line or even a mixture of the two.

The defaults by a few members of SHGs and/or their family members to the financing bank should not ordinarily come in the way of financing SHGs by Bank provided the SHG is not in default to it. However, the bank loan was not be utilized by the SHGs for financing a defaulter member to the Bank.
 

3. Opening of S.B. Account
 

S.B. account of the registered or unregistered SHGs are to be opened. For this purpose a duly filled in application form should be obtained along with

i.

a copy of the resolution passed in the meeting of the SHG signed by all members containing the decision to open the bank account with authorization of 3 members for joint operation of the account

ii.

Bye law if any, initial cash deposit of Rs.50/- may be accepted for opening of S.B. account. The A/c. and Pass Book should be in the name of SHG.
 

4. Internal lending by SHG
 

The deposit held in SB Account over the minimum balance of Rs.50/- shall be utilized for internal lending among the members. The repayment including principal and interest shall be deposited in the SB account and further lending be carried on to maintain the cycle.
 

5. Assessment of SHG
 

The SHG is required to be assessed by the branch according to prescribed check list before extending credit. (copy enclosed)
 

6. Credit facility
 

i.

Loan should be sanctioned in the name of the Group and not in the name of individual members.

ii.

Amount of loan should be up to four times the group corpus fund. Higher amount may however, be sanctioned depending upon the Credit absorption capacity, conduct of the SHG and viability of the project.

iii.

Group corpus will include the balance in SB Account, outstanding balance in the loan ledger, cash held by authorized person and any other contribution received by SHG as grant, donation etc.

iv.

Credit facility will be in the forms of Term Loan / Cash Credit / Overdraft depending upon the productive activity undertaken.
 

7. Margin & Security Norms
 

Up to Rs.50,000/- no margin and collateral security to be obtained. The branch shall not mark lien on the deposits in SB A/c. of the SHG which is a component of group corpus fund meant for internal lending. However, a letter of guarantee may be taken from all the members of the group. In case of loans to NGOs, third party guarantee and/or collateral security may be insisted upon.