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Welcome to my blog “Banker For You”
As you know that due to COVID-19 pandemic, the overall Indian economy has affected consequently many people have lost their jobs. In this situation, starting a new startup or business by a group of people (Self Help Group) will be more beneficial for you rather than wondering for jobs.
Friends, In the below article I will talk about a very efficient and effective scheme for employment generation launched by the Indian Government.
The name of the scheme is “DEENDAYAL ANTYODAYA YOJANA-NATIONAL RURAL LIVELIHOOD MISSION”
National Rural Livelihoods Mission (NRLM) was launched by the Ministry of Rural Development (MoRD), Government of India with effect from 1st April 2013 by restructuring and replacing the “SWARNJAYANTI GRAM SWAROZGAR YOJANA”.
In November 2015, the program was renamed Deendayal Antayodaya Yojana (DAY-NRLM).
The 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.
NRLM set out with an agenda to cover 7 Crore rural poor households, across 600 districts, 6000 blocks, 2.5 lakh Gram Panchayats and 6 lakh villages in the country through self-managed Self Help Groups (SHGs) and federated institutions and support them for livelihoods collectives in a period of 8-10 years.
DAY-NRLM is designed to be a highly intensive program and focuses on intensive application of human and material resources in order to mobilize the poor into functionally effective community owned institutions, promote their financial inclusion and strengthen their livelihoods. DAY-NRLM complements these institutional platforms of the poor with services that include financial and capital services, production and productivity enhancement services, technology, knowledge, skills and inputs, market linkage, etc. T
The community institutions also offer a platform for convergence and partnerships with various stakeholders by building an environment for the poor to access their rights and entitlements and public service.
A women’s Self-Help Group (SHG), coming together on the basis of mutual affinity is the primary building block of the DAY-NRLM community institutional design. DAY-NRLM focuses on building, nurturing and strengthening the institutions of the poor women, including the SHGs and their Federations at village and higher levels. In addition, DAY- NRLM promotes livelihood institutions for rural poor. The mission provides continuous hand-holding support to the institutions of the poor for a period of 5 – 7 years till they come out of abject poverty. The community institutional architecture put in place under DAY- NRLM will provide support for a much longer duration and of a greater intensity.
The support from DAY-NRLM includes all round capacity building of the SHGs ensuring that the group functions effectively on all issues concerning their members, financial management, providing them with initial fund support to address vulnerabilities and high cost indebtedness, formation and nurturing of SHG federations, making the federations evolve as strong support organizations, making livelihoods of the poor sustainable, formation and nurturing of livelihoods organizations, skill development of the rural youth to start their own enterprises or take up jobs in organized sector, enabling these institutions to access their entitlements from the key line departments, etc.
The scheme is available with Self Help Group. The process starts with a formation of Self Help Group:
SHG is an informal group and registration under any Societies Act, State cooperative Act or a partnership firm is not mandatory. However, Federations of Self Help Groups formed at Village, Gram Panchayat, Cluster or higher level may be registered under appropriate acts prevailing in their States.
Women SHGs ( Self Help Group) and their Federations
Women SHGs under DAY-NRLM consist of 10-20 persons. In case of special SHGs i.e. groups in the difficult areas, groups with disabled persons, and groups formed in remote tribal areas, this number may be a minimum of 5 persons.
DAY-NRLM promotes affinity-based women Self Help Groups (SHGs).
Only for groups to be formed with Persons with disabilities, and other special categories like elders, trans genders, DAY-NRLM will have both men and women in the Self-Help Groups.
Financial Assistance to the SHGs(Self Help Group)
Revolving Fund (RF): DAY-NRLM would provide Revolving Fund (RF) support to SHGs in existence for a minimum period of 3/6 months and follow the norms of good SHGs, i.e. they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts.
Only such SHGs that have not received any RF earlier will be provided with RF, as corpus, with a minimum of ₹10, 000 and up to a maximum of ₹15,000 per SHG. The purpose of RF is to strengthen their institutional and financial management capacity and build a good credit history within the group.
Community Investment Support Fund (CIF)
CIF will be provided to the SHGs in the intensive blocks, routed through the Village level/ Cluster level Federations, to be maintained in perpetuity by the Federations. The CIF will be used, by the Federations, to advance loans to the SHGs and/or to undertake the common/collective socio-economic activities.
Introduction of Interest subvention:
DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of ₹ 300,000/- per SHG. This will be available across the country in two ways:
The banks will lend to the women SHGs @7% up to an aggregated loan amount of ₹ 300,000/-.The SHGs will also get additional interest subvention of 3% on prompt repayment, reducing the effective rate of interest to 4%.
The banks will lend at their respective lending rate applicable to SHGs. All women SHGs under DAY– NRLM, will be eligible for interest subvention on prompt payment to The extent of difference between the lending rates and 7% for the loan up to Rs. 300,000/- subject to maximum of 5.5 % or as prescribed by the MoRD. This part of the scheme will be operationalized by SRLMs.
Now you have come across the knowledge about the DAY-NRLM scheme.In further paragraphs I will discuss the process of loan and how it works.
After formation of a Self Help group as discussed above, the first thing you need to do is Opening of a Saving account:
Opening of Saving accounts of SHGs: The role of banks would commence with opening of accounts for all the Women SHGs including members with disability and the Federations of the SHGs. The SHGs engaged in promoting savings habits among their members would be eligible to open savings bank accounts.
Know Your Customer (KYC) verification of only the office bearers shall suffice for opening of savings bank accounts.
Banks Will not insist on Permanent Account Number (PAN) of SHGs at the time of opening of account or transactions and may accept declaration in Form No 60 as may be required.
Customer Due Diligence of all the office bearers shall suffice. No separate CDD of the members or office bearers shall be necessary at the time of credit linking of SHGs. Opening of savings accounts of all members with the bank shall not be made a prerequisite for credit linkage of SHGs.
Opening of Savings accounts of Federation of SHGs: Banks Will open savings accounts of Federations of SHGs at village, Gram Panchayat, Cluster or higher level. These accounts may be categorized as savings accounts for ‘Association of persons’. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India will be applicable.
The lending norms under DAY-NRLM are as under:
The eligibility criteria for the SHGs to avail loans:
SHG should be in active existence at least since the last 6 months as per the books of account of SHGs and not from the date of opening of S/B account;
SHG should be practicing ‘Panchasutras’ i.e. Regular meetings; Regular savings; Regular inter-loaning; Timely repayment; and Up-to-date books of accounts;
Qualified as per grading norms fixed by NABARD. As and when the federations of the SHGs come to existence, the grading exercise can be done by the Federations to support the Banks;
The existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of 3 months.
Loan Application:
All banks use the Common Loan Application Forms recommended by Indian Banks Association (IBA) for extending credit facility to SHGs.
Loan amount:
Emphasis is laid on the multiple doses of assistance under DAY- NRLM. This would mean assisting an SHG over a period of time, through repeated doses of credit, to enable them to access higher amounts of credit for taking up sustainable livelihoods and improve on the quality of life.
SHGs can avail either Term Loan (TL) or a Cash Credit Limit (CCL) loan or both based on the need. In case of need, additional loans can be sanctioned even though the previous loan is outstanding.
The amount of credit under different facilities should be as follows:
Cash Credit Limit (CCL): In case of CCL, banks will sanction a minimum loan of ₹ 5 lakhs to each eligible SHGs for a period of 5 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:
DP for First Year: 6 times of the existing corpus or minimum of ₹ 1 lakh whichever is higher.
DP for Second Year: 8 times of the corpus at the time review/ enhancement or minimum of ₹ 2 lakh, whichever is higher.
DP for Third Year: Minimum of ₹ 3 lakhs based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit history.
DP for Fourth Year onwards: Minimum of ₹ 5 lakhs based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit History.
Term Loan: In case of Term Loan, banks are advised to sanction loan amount in doses as mentioned below:
First Dose: 6 times of the existing corpus or minimum of ₹ 1 lakh whichever is higher.
Second Dose: 8 times of the existing corpus or minimum of ₹ 2 lakh, whichever is higher.
Third Dose: Minimum of ₹ 3 lakhs based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit history.
Fourth Dose: Minimum of ₹ 5 lakhs based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit History
Purpose of loan and repayment:
The loan amount will be distributed among members based on the Micro Credit Plan (MCP) prepared by the SHGs. The loans may be used by members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihoods by the individual members within the SHGs or to finance any viable common activity started by the SHGs.
In order to facilitate use of loans for augmenting livelihoods of SHG members, it is advised that at least 50% of loans above ₹ 2 lakhs and 75% of loans above ₹ 4 lakhs be used primarily for income generating productive purposes. Micro Credit Plan (MCP) prepared by SHGs would form the basis for determining the purpose and usage of loans.
Repayment schedule could be as follows:
The First year/ first dose of loan will be repaid in 12-18 months in monthly/ quarterly instalments.
The Second year/ Second dose of loan will be repaid in 18-24 months in monthly/ quarterly instalments.
The Third year/ Third dose of loan will be repaid in 24-36 months in monthly/ quarterly instalments.
The loan from Fourth year/ Fourth dose onwards has to be repaid between 3-6 years based on the cash flow in monthly/ quarterly installments.
Security and Margin: No collateral and no margin will be charged up to ₹ 10.00 lakhs limit to the SHGs. No lien will be marked against savings bank accounts of SHGs and no deposits will be insisted upon while sanctioning loans.
For submission of your application for SHG linkage contact the Department of Panchayat and Rural Development of your district.
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