What changed
The collateral-free loan ceiling for SHGs under DAY-NRLM has been increased from ₹10 lakh to ₹20 lakh. Loans between ₹10 lakh and ₹20 lakh are now eligible for CGFMU guarantee without collateral or lien on savings accounts, while loans up to ₹10 lakh remain fully collateral- and margin-free.
What it means for you
Banks can now extend higher unsecured credit to SHGs without additional risk, as the CGFMU guarantee covers the entire loan amount even if it falls below ₹10 lakh later. This simplifies lending operations and encourages larger ticket sizes for rural livelihood groups, potentially boosting portfolio growth in priority sector lending.
What you must do
- Update internal loan policies and system limits to reflect the new ₹20 lakh collateral-free threshold for SHGs under DAY-NRLM.
- Ensure loan documentation for amounts above ₹10 lakh and up to ₹20 lakh includes CGFMU coverage eligibility without collateral or lien.
- Train branch staff on the revised guidelines to avoid insisting on deposits or marking liens on SHG savings accounts.
- Review existing SHG loan portfolios to identify accounts that can be restructured or enhanced under the new limit.
Who it affects
Public sector banks, Private sector banks including small finance banks, Self Help Groups under DAY-NRLM, Rural lending operations teams
Does the CGFMU guarantee apply to loans below ₹10 lakh?
No, loans up to ₹10 lakh remain fully collateral- and margin-free but are not covered under CGFMU. Only loans above ₹10 lakh and up to ₹20 lakh are eligible for the guarantee.
Can banks still mark a lien on SHG savings accounts for loans above ₹10 lakh?
No, the circular explicitly prohibits marking a lien on SHG savings accounts for any loan up to ₹20 lakh, even when CGFMU coverage applies.
What happens if a loan above ₹10 lakh later reduces below ₹10 lakh?
The entire loan remains eligible for CGFMU coverage irrespective of the outstanding amount, even if it subsequently goes below ₹10 lakh.