What changed
The master circular was updated to incorporate all modifications in the DAY-NRLM scheme issued up to September 18, 2020. Key changes include the discontinuation of capital subsidy for SHGs and the introduction of interest subvention to cover the gap between lending rates and scheme rates.
What it means for you
Banks must align their lending processes with the updated scheme, ensuring no capital subsidy is sanctioned. The interest subvention provision will affect loan pricing for SHGs, requiring banks to adjust their systems to claim the subsidy. Revolving fund norms as specified must be strictly followed.
What you must do
- Update internal circulars and training materials to reflect the discontinuation of capital subsidy under DAY-NRLM.
- Ensure loan officers are aware of the interest subvention mechanism and its impact on SHG loan pricing.
- Verify that revolving fund disbursements comply with the minimum 3-6 month SHG existence and Panchasutra norms.
- Coordinate with State Rural Livelihoods Missions (SRLMs) for proper routing of Community Investment Support Fund (CIF) through federations.
Who it affects
Public sector banks, Private sector banks (including small finance banks), Bank branches in rural and semi-urban areas, Loan officers handling SHG financing
What is the revolving fund amount per SHG under DAY-NRLM?
The revolving fund ranges from a minimum of ₹10,000 to a maximum of ₹15,000 per SHG, provided the SHG has been in existence for a minimum period of 3 or 6 months and follows Panchasutra norms.
Is capital subsidy still available for SHGs under DAY-NRLM?
No, capital subsidy has been discontinued under DAY-NRLM. Banks must not sanction any capital subsidy to SHGs from the date of implementation of the scheme.
How does interest subvention work for banks?
Interest subvention covers the difference between the bank's lending rate and 7% on loans up to ₹300,000 per SHG. In 250 identified districts, banks lend at 7% and are subvented up to 5.5% difference; in other districts, SRLMs subvent the difference directly into loan accounts on prompt repayment.