RBI: Collateral-Free Loans Upto 20 Lakh To SHG’s

By Tharini Ilanchezhian

The Reserve Bank of India, RBI, has notified that the collateral-free loans to the self-help groups have been enhanced to 20 lakh from 10 lakh which was fixed previously. This has been announced under the Deendayal Antyodaya Yojana – National Rural Livelihood Mission.

The National Rural Livelihood Mission is the program that strives to eradicate poverty through building internal institutional of the economically backward people, particularly women, and enables the institutions to avail a range of financial services and livelihood. The approach adapted by the NRLM is demand-driven. It paves way for the state to formulate its own poverty eradication plans.

The RBI stated in a circular that the loans that are provided to the Self-help groups without being charged for collateral are up to Rs 20 lakh. There should be no Lien marked one the Savings Bank (SB) account of the SHG's. It also said that during sanctioning, no deposit should be insisted upon.

In the case of loans from the amount of Rs 20 lakh up to the amount of Rs 20 lakh, collateral cannot be charged and no Lien should be marked against the savings bank account of the SHG's. However, the whole loan, irrespective of the outstanding loan, even in the case of it going below 10 lakh, makes it eligible for coverage under the CGFMU, Credit Guarantee Funds for Micro Units.

The NRLM, National Rural Livelihoods Mission was launched in the year 2011, by the Union Ministry of Rural Development. Four years later, the plan was renamed as Deendayal Antyodaya Yojana. The initiative of this plan sets out with the mission of 7 crore rural households, covering 600 districts, 6000 blocks, 2.5 lakh Gram Panchayats and 6 lakh villages in the country with the aid of Self-help groups that are institutions that work in supporting the livelihood of the collectives for a period of 8-10 years.

keywords: RBI, Deendayal Antyodaya Yojan, National Rural Livelihood Mission