What changed
RBI consolidated all existing guidelines on SHG-Bank Linkage Programme into a single Master Circular, updating references up to June 30, 2012. This replaces earlier individual circulars and provides a unified reference for banks.
What it means for you
Banks now have a single document to guide SHG lending, which should streamline operations and reduce compliance confusion. The circular reinforces that SHG linkage is a cost-effective way to reach rural poor, improve recovery rates, and lower transaction costs for both banks and borrowers.
What you must do
- Review and implement the consolidated SHG-Bank Linkage guidelines from this Master Circular.
- Treat SHG lending as a business opportunity and design area-specific loan packages.
- Ensure SHG loans are part of priority sector lending and monitor recovery performance.
- Train branch staff on SHG appraisal and linkage procedures as per the circular.
Who it affects
All Scheduled Commercial Banks, Rural and semi-urban bank branches, Microfinance and priority sector lending teams
What is the main purpose of this Master Circular?
It consolidates all RBI guidelines on SHG-Bank Linkage Programme issued up to June 30, 2012, into one document for easy reference by banks.
Does this circular introduce new rules?
No, it only consolidates existing guidelines. No new instructions are added; it updates and replaces earlier circulars.
How does SHG linkage benefit banks?
It reduces transaction costs for small loans, improves recovery rates (nearly 100% as per studies), and helps banks meet priority sector lending targets.