Collateral-free SHG loans under DAY-NRLM doubled to ₹20 lakh
Current · Source: Reserve Bank of India · RBI/2021-22/83 · issued 09 Aug 2021 · ~2 min read
Quick answerRBI has raised the collateral-free loan limit for Self Help Groups under DAY-NRLM from ₹10 lakh to ₹20 lakh, aligning with CGFMU amendments. Loans above ₹10 lakh and up to ₹20 lakh now qualify for credit guarantee coverage without collateral or lien on savings accounts.
The rule, in the simplest words
The loan limit without [security/collateral] for Self Help Groups has been increased from ₹10 lakh to ₹20 lakh
Loans between ₹10 lakh and ₹20 lakh are now eligible for a [credit guarantee/insurance] without [security/collateral] or [lien/a hold] on savings accounts
Loans up to ₹10 lakh remain fully without [security/collateral] or [margin/extra amount paid]
How it plays out — a real example
A rural lending officer in Mumbai can now provide a ₹15 lakh loan to a local Self Help Group without asking for any security or collateral, and the entire loan amount will be covered by the Credit Guarantee Fund for Micro Units, making it easier for the group to access credit and grow their business. This change simplifies the lending process and encourages the officer to approve larger loans to support rural livelihoods. The officer will update the loan documents to reflect the new eligibility for credit guarantee coverage.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/83
FIDD.GSSD.CO.BC.No.09/09.01.003/2021-22
August 9, 2021
The Chairman/ Managing Director/Chief Executive Officer
Public Sector Banks
Private Sector Banks
(including Small Finance Banks)
Madam/Dear Sir,
Enhancement of collateral free loans to Self Help Groups (SHGs) under DAY-NRLM from ₹10 lakh to ₹20 Lakh
Please refer to the Master Circular FIDD.GSSD.CO.BC.No.04/09.01.01/2021-22 dated April 1, 2021 , on Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM).
2. In this connection, the Government of India, vide their Gazette Notification S.O. 2668(E) dated July 1, 2021 , has notified amendments in the Credit Guarantee Fund for Micro Units (CGFMU) Scheme in paragraph (2) sub-paragraph (xii) of the notification of the Government of India, Ministry of Finance (Department of Financial Services), number S.O. 1443(E), dated the April 18, 2016 , published in the Gazette of India.
3. In view of the above amendment, paragraph 7.4 of RBI Master Circular FIDD.GSSD.CO.BC.No.04/09.01.01/2021-22 (on DAY-NRLM) dated April 01, 2021 stands modified as under:
7.4 Security and Margin:
7.4.1 For loans to SHGs up to ₹10.00 lakh, no collateral and no margin will be charged. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.
7.4.2 For loans to SHGs above ₹10 lakh and up to ₹20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs. However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).”
4. All other provisions of the Master Circular remain unchanged.
Yours faithfully
(Kaya Tripathi)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/83 · issued 09 Aug 2021. The plain-English explanation above is BankPulse’s own independent summary.
Train branch staff on the revised guidelines to avoid insisting on deposits or marking liens on SHG savings accounts.
💰 Credit
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.
📜 Compliance
Review existing SHG loan portfolios to identify accounts that can be restructured or enhanced under the new limit.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Credit Manager at a bank this circular applies to (Public sector banks, Private sector banks including small finance banks, Self Help Groups under DAY-NRLM, Rural lending operations teams), your first concrete step on “Collateral-free SHG loans under DAY-NRLM doubled to ₹20 lakh” is: “Update internal loan policies and system limits to reflect the new ₹20 lakh collateral-free threshold for SHGs under DAY-NRLM.” (RBI issued this 09 Aug 2021).
Circular: RBI/2021-22/83 -- Collateral-free SHG loans under DAY-NRLM doubled to ₹20 lakh
Issued: 09 Aug 2021
Action required: Update internal loan policies and system limits to reflect the new ₹20 lakh collateral-free threshold for SHGs under DAY-NRLM.
Action required: Ensure loan documentation for amounts above ₹10 lakh and up to ₹20 lakh includes CGFMU coverage eligibility without collateral or lien.
Action required: Train branch staff on the revised guidelines to avoid insisting on deposits or marking liens on SHG savings accounts.
Action required: Review existing SHG loan portfolios to identify accounts that can be restructured or enhanced under the new limit.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12143&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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