RBI notifies hike in collateral free loans to SHGs under Deendayal Antyodaya Yojana

Reserve Bank of India (RBI) had notified the enhancement of collateral-free loans to self-help groups (SHGs) from Rs 10 lakh to Rs 20 lakh under Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM). The DAY-NRLM is the flagship programme of the government of India for poverty reduction through building strong institutions for the poor, particularly women, and enabling these institutions to access a range of financial services and livelihoods. DAY-NRLM adopts a demand-driven approach, enabling the states to formulate their own state-specific poverty reduction action plans.

Free loans hiked up to Rs 20 lakh

For loans up to Rs 10 lakh to SHGs, no collateral and no margin will be charged, the RBI said in a circular. Also, no lien should be marked against the savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.

“For loans to SHGs above Rs 10 lakh and up to Rs 20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs,” the central bank said in a circular.

However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below Rs 10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).
The RBI issued the circular after the government recently notified amendments in the CGFMU scheme.