What changed
RBI issued a Master Circular that consolidates and updates all previous circulars on the SHG-Bank Linkage Programme up to June 30, 2013. This replaces earlier fragmented guidelines with a single reference document for banks.
What it means for you
Banks now have a unified set of instructions to streamline SHG lending, reducing confusion from multiple circulars. The circular reinforces the policy thrust to treat SHG linkage as a business opportunity, encouraging banks to design area-specific loan packages for rural poor, especially women.
What you must do
- Review and adopt the Master Circular as the primary reference for all SHG-Bank Linkage operations.
- Ensure branch staff are trained on the consolidated guidelines to improve credit access for rural poor.
- Design area-specific loan packages for SHGs, considering local needs and skills, as recommended by the Kalia Working Group.
- Monitor recovery performance and transaction costs to align with the programme's cost-effective approach.
Who it affects
All Scheduled Commercial Banks, Rural branches dealing with SHG lending
What is the purpose of this Master Circular?
It consolidates all existing RBI guidelines on the SHG-Bank Linkage Programme into one document, making it easier for banks to access and implement instructions up to June 30, 2013.
Does this circular introduce new requirements?
No, it only consolidates and updates previous circulars. Banks should continue following existing practices as outlined in the Master Circular.
Why is SHG linkage important for banks?
It offers a cost-effective way to reach rural poor, improves loan recovery (nearly 100% in pilot projects), and reduces transaction costs for both banks and borrowers.