Page 194 - DMGT303_BANKING_AND_INSURANCE

Unit 9: Priority Sector Lending

the ability to manage, utilize and repay their loan i.e. financial discipline), availing bank Notes
loan etc. Hence it is suggested that the collection of saving amount, imparting of loans,
recovering installments of loans etc. should be in the meetings at a common place and in
the presence of all the members.
9. Can branch finance to individual members of SHG?

Ans. No branch will finance to group and not to individual members.
10. What are the criteria for assessing the SHG for financing by the bank?
Ans. Group should be in existence for at least for period of six months, should have under taken
savings and credits from its own resources and should be maintaining proper accounts/
record, meeting registers etc. The factors like regular conduct of meetings, regular savings,
minimum absence of the members, utilizing of saving amount amongst majority of
members through inter-lending, loan recoveries, maintenance of books, knowledge of
the rules of SHGs to all the members, education level etc., are the basis for grading the
group. If the branch is satisfied about the working of the group, then loan can be given
prior to 6 months also.
11. If NGO which promoted SHG approaches the bank for advance for onward lending to
SHG; can bank finance such NGO?

Ans. NGO having good track record, in existence for at least 3 years and having audited balance
sheets can be financed.
12. What is the quantum of finance which can be made to SHG?

Ans. It should be in proportion of saving to loan and could vary from 1:1 to 1:4 depending upon
the assessment of group by the branch. With satisfactory repayment, the ratio may be
increased after each cycle until absorptive capacity of the group and its members have
been reached. In PNB, bank has allowed loan to the tune of 10 times of the savings
provided the track record of SHG in terms of rating, managerial capabilities, risk taking
capabilities etc. repayment and accounting has been satisfactory, detail of which is as
under:
(a) At the First Stage (i.e. From date of Ist lending to up to 1 year) proportion of saving
to loan @ 1:4,

(b) At Second Stage (From Ist lending to completion of 2 year period): 1: 7,
(c) At third stage (from Ist lending to Completion of 3 years): 1: 10.
13. What is the Margin requirement?
Ans. Saving of the group is to be treated as Margin.

14. What is the rate of interest to be charged from Self Help Group?
Ans. @ PLR/PTLR less 1%.
15. What is the rate of interest to be charged from voluntary agencies?
Ans. @ PLR/PTLR

16. What are the security norms?
Ans. SHGs would not be in a position to offer any security other than the group savings, as
such, the advance may be treated as clean/unsecured advance. Where finance provided by
the branch is a clean/unsecured advance. Incumbents in charge have been empowered to
sanction loan to SHG up to a maximum limit of Rs. 1 lac. However, RMs have been
empowered to finance SHGs beyond incumbents' powers up to Rs. 5 lac. ZM has been

LOVELY PROFESSIONAL UNIVERSITY 189