Provide loans to women SHGs at 7%: RBI to banks

The RBI has directed Public Sector Banks (PSBs) to give loans to women Self Help Groups (SHGs) at a rate of 7% per annum so as to provide them the benefit of interest rate subvention scheme under the Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme.

As per a notification by the central bank, PSBs will be subvented to the extent of difference between the Weighted Average Interest charged and 7% subject to the maximum limit of 5.5%t, for the FY-2014. This subvention will be available to all the PSBs on the condition that they make SHG (self help group) credit available at 7% in the 150 districts.

Similarly, the Regional Rural Banks (RRBs) will be subvented to the extent of difference between the lending rates and 7% for the FY-2014 on the condition they make SHG credit available at 7%.

Furthermore, SHGs will be provided an additional 3% per cent subvention on immediate repayment of loan. Banks have been directed to charge an interest rate of 7% per cent for all loans up to Rs 3 lakh, approved to women SHGs on or after December 1, 2013. However, for loans extended between April 1, 2013 and November 30, 2013, banks should convert the rate of interest to 7% for all the existing loan accounts of the SHGs with effect from April 1, 2013.

About Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme

Government of India launched Swarnajayanti Gram Swarojgar Yojana (SGSY) on April 1, 1999 to provide sustainable income to poor people living in rural areas of the country. The scheme comes under the Ministry of Rural Development.

Aim: Providing self-employment to villagers through the establishment of Self-Help Groups (SHGs). Activity clusters are established based on the aptitude and skill of the people which are nurtured to their maximum potential. Funds are provided by NGOs, banks and financial institutions.

Month: Current Affairs - November, 2013