How to Avail SHG Loan Under DAY-NRLM Scheme?

Last updated on October 9th, 2023 at 01:01 pm

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NRLM the flagship program by Central Government aimed at poverty reduction in the country by providing financial support to the rural area.

Government of India (GoI) launched the National Rural Livelihood Mission (NRLM) in new structure by replacing Swarnajayanti Gram Swarojgar Yojana (SGSY) with effect from 01st April 2013.

The main agenda of the scheme is reducing poverty in the country by building strong institutions in the rural area to support themselves. The scheme gives preference to the woman institutions in the rural area. Thus it encourages building of a strong Self Help Groups (SHG’s) by and for woman.

NRLM unlike SGSY provides continuous financial support and steady flow of cash to the SHG members for 5 to 7 years. Thus it helps the SHG’s to build a financially secure environment to the rural area over the longer time.

We will discuss elaborately on the DAY-NRLM scheme below.

Table of Contents

What is DAY-NRLM?

As said above the DAY-NRLM scheme is introduced for poverty reduction in rural areas by providing revolving credit. NRLM adopts a demand driven approach, enabling the states to formulate their own state specific poverty reduction action plan named as SRLM.

DAY-NRLM provides credit facility to SHG in multiple doses. Thus providing gradual increase in the fund availability and improved livelihood.

Under the DAY-NRLM scheme at first 250 districts were identified as intensive areas for the implementation of scheme. But now all the areas have been included to avail the scheme.

The scheme specifications are as below.

Role of Banks in providing Credit Facility to SHG

The credit facility is provided by NRLM to SHG’s through the bank accounts. Thus banks have following responsibility under NRLM scheme.

Opening SB accounts for SHG, Federation of SHGs
Encourage transaction of SHG to be done through the accounts opened.
The account should be operated with dual control. Thus the SHG should do any transaction with jointly operated account by atleast two persons.
Providing loan facility for the SHG and the individual members of SHG with the proper eligibility.
Banks should do followup to make sure the funds provided are used for improving the livelihood of its members. This could be verified by regular visit to the SHG meetings and checking the fund usage statements.

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Lending Norms

DAY-NRLM scheme provides lending norms that should be followed by all the financial institutions. The following norms should be followed for lending under NRLM.

Prerequirements for Availing Loan

SHG is an informal body hence not required any registration under law. Also for opening the savings account, submitting KYC of the office bearers to the bank is enough.

But for providing credit facility the KYC of all the members of the SHG should be submitted to the bank.

Various SHGs can form a Federation of SHGs at Block level or Tehsil level. But such Federations requires registration as per state law.

Eligibility Criteria for Availing DAY-NRLM

For availing loan the SHG should fulfill the following criterias.

The SHG should be in existence for at least 6 months. Also the proper statement and attendance book should be available with the SHG for verification of the same.
SHGs should be practicing ‘Panchasutras’ i.e., regular meetings, regular savings, regular inter-loaning, timely repayment and up-to-date books of accounts.
SHB should follow the grading norms provided by NABARD.

Share of Loan

As the NRLM is dedicated to rural India development, the loan facility is aimed at providing support to minority communtity.

The share of the loan portfolio is as under.

Beneficiary	Share
SC/ST	50%
Minority	15%
Person with Disabilities	3%
Others	32%

SHG NRLM Loan Portfolio

NRLM will be funded by Centre and State in the ratio of, 60:40.
For the North Eastern States the ratio is 90:10 for Centre and State.
In Union Territories the 100% share is borne by Centre.

Loan Amount

SHG can request for the loan facility as a Cash Credit (CC) or Term Loan (TL), the loan amount is calculated as below.

First dose (First Year): 6 times of the existing corpus or minimum of Rs. 1.5 lakh, whichever is higher.
Second dose (Second Year): 8 times of the existing corpus or minimum of Rs. 3 lakh, whichever is higher.
Third dose (Third Year): Minimum of Rs. 6 lakh, based on the MCP prepared by the SHGs and appraised by the federations/support agency and the previous credit history.
Fourth dose and after: Above Rs. 6 lakh, based on the MCP prepared by the SHGs and appraised by the federations/support agency and the previous credit history.

Note: Corpus is inclusive of revolving fund, if any, received by that SHG, its own saving, interest earning by SHG from on-lending to its members and by interest on SB account, income from other sources, and funds from other sources in case of promotion by other institutions/NGO.

Purpose of Loan

The credit facility is provided for consumption needs of the SHG members. But is is advised that at least 50% of loans above Rs.2 lakhs and, 75% of loans above Rs.4 lakhs and at least 85% of loans above Rs. 6 lakhs be used primarily for income generating productive purposes.

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Margin

No margin is required up to the loan limit of Rs.10 lakhs.
No collateral required up to Rs.20 lakh. But guarantee cover under CGTFMU may be obtained.

Interest Subvention

Capital Subsidy under NRLM has been discontinued. But government is now providing Interest subvention for the customer with prompt repayment history.

Thus the interest subvention provided is as below.

In 250 identified districts, Women SHGs will get loan @ 7% interest up to Rs.3.0 lakhs. The SHGs will also get additional interest subvention of 3% on prompt payment, reducing the effective rate of interest to 4%.
In other districts bank will finance as per its own ROI but difference between this ROI and 7% (maximum 5.50 %) will be credited as interest subsidy directly to loan account of prompt payers.

Conclusion