What changed
RBI forwards accepted recommendations: every rural branch may set up a branch advisory committee including elected panchayat representatives and women leaders, meeting at least quarterly with a controlling official present. Banks in states with weak SHG-bank linkage need to gear up rural branches by evolving a three-year action plan. Banks may consider setting up microfinance cells at central offices and may encourage local book writers for SHG accounts on a cost-sharing basis.
What it means for you
Banks must operationalize these committees quickly, adding compliance overhead for rural branches and controlling officials. The SHG action plan requires dedicated resources in lagging states, potentially increasing credit flow to agriculture. Microfinance cells and book-writer support will improve SHG account quality but need budget allocation and coordination with promoting agencies.
What you must do
- Consider forming branch advisory committees at every rural branch with panchayat representatives and women leaders, and schedule quarterly meetings with controlling official attendance.
- Identify states where SHG-bank linkage is slow and gear up rural branches by evolving a three-year action plan to accelerate linkages.
- Consider setting up adequately staffed microfinance cells at central offices and in each state.
- Encourage use of local book writers for SHG accounts, possibly on a cost-sharing basis with promoting agencies.
- Issue instructions to all controlling offices and branches immediately and report action taken to RBI.
Who it affects
All scheduled commercial banks with rural branches, Controlling officials of rural branches, Banks operating in states with low SHG-bank linkage, Microfinance cells and rural credit teams
What is the composition of the branch advisory committee?
It may include select elected representatives, including women leaders, of local panchayati raj institutions within the branch's service area.
What is the deadline for implementing these recommendations?
Banks are asked to initiate action immediately and issue suitable instructions to controlling offices and branches; no specific deadline is given, but action taken must be communicated to RBI at the earliest.
Do all banks need to set up microfinance cells?
RBI suggests banks may consider setting up microfinance cells at their central offices, and specifically asks banks in slow SHG states to set up adequately staffed cells at central offices and in each state.