What changed
RBI issued a master circular consolidating all existing guidelines on the SHG-Bank Linkage Programme up to March 31, 2023. It reiterates that banks must meet the entire credit requirements of SHG members, including income generation, social needs, and debt swapping, as per the 2008-09 Union Budget announcement. The circular also emphasizes simplified KYC norms for SHGs and allows loans beyond the 1:4 savings-to-loan ratio for matured groups.
What it means for you
Banks must treat SHG lending as a priority sector and integrate it into all credit plans from branch to state level. The circular removes procedural hurdles, allowing unregistered SHGs to open savings accounts and encouraging consumption loans. This is a clear signal to deepen financial inclusion and support women-led groups, which constitute 85% of linked SHGs.
What you must do
- Update internal policies to align with the consolidated master circular and ensure SHG lending is included in all credit plans.
- Simplify loan documentation and approval processes for SHGs, making them hassle-free and covering consumption needs.
- Train branch staff on simplified KYC norms for SHGs and on sanctioning loans beyond the 1:4 savings ratio for mature groups.
- Monitor and report SHG lending performance as part of priority sector targets, focusing on women-led groups.
Who it affects
All Scheduled Commercial Banks, Branch managers and credit officers handling rural lending, SHG members, especially women entrepreneurs, NABARD and other rural financial institutions
What is the maximum loan limit for SHGs?
For SHGs, loans can range from 1:1 to 1:4 of savings. For matured SHGs, banks can sanction loans beyond four times savings at their discretion.
Does this circular change any existing rules?
This master circular consolidates all previous guidelines up to March 31, 2023, into one document. It does not introduce new rules but ensures all existing instructions are compiled in one place.