guidance notes on financial inclusion - kudumbashree inclusion.pdf · guidance notes on financial...

Guidance Notes on Financial Inclusion

Prepared by the Group Constituted at the workshop held at NIRD,Hyderabad

between the 6th

to the 16th

of February-2013

Team Members

Pushpendra Singh Tiwari, BRLPS

Sanjay Kr. Mishra, BRLPS

Manish Bijalwan, GLPC

R.L.Agarwal, CGSRLM

S.K.Patra, WBSRLM

Mohan K.B. Singh, ADS

Arunmolishelvan, PVP, Chennai

Mohan, RGMVP

Sumit Chandra, YP-NRLM

Ram Chandra Reddy, Consultant - NMMU

Charu Lata Sharma, NMMU

Sourav Roy, NMMU

Rajan Babu, NMMU

Financial Inclusion

Ensuring access to ‘Appropriate’, ‘Reliable’, ‘Affordable’, and

‘Convenient’ Financial services to all poor households.

Appropriate – A/C opening; Savings; Credit; Insurance;

Remittances; Equity; Pension; Entitlement/ Payments

Reliable – Accessible on a sustainable basis with dignity

Affordable – At fair cost

Convenient - Services at their door step (within 5km )

Making poor the preferred clients of the banking system and mobilizing bank

credit through institutions of poor is core to the NRLM financial inclusion.

Financial Inclusion Life Cycle of an SHG

SHG Formation

1. Saving

2. Book Keeping

3. S/B account opening (SHG & Individual Members)

4. 1st Grading of the SHG

5. Micro Plan Preparation (Individual SHG Level)

RF disbursement

Micro Plan Consolidation at VO level

Insurance

6. Credit Linkage with Bank

2nd

Grading of SHG (by bank)

7. CIF disbursement (Through VO)

8. 3rd

Grading of SHG (by VO)

1. Savings of SHGs

Saving-

Saving is considered as the blood of the SHG, which is flowing in the group. It is

contributed by all the members who voluntarily decide to save a minimum fixed amount of

money every week in the group according to their capacity. Member saving is the prime

asset of the poorwomen.

Types of Saving:

Compulsory Savings: the amount is being collected from the members at regular

intervals at the rate which has been fixed by the SHG. It should be reviewed annually and

also can be fixed some higher limit when SHG members get some higher income.

Voluntary Savings: The members may bring their voluntary savings as per their

convenience in addition to compulsory saving. Purpose of voluntary saving could be for

celebratingfestival, agriculture activity, child education, buying uniform etc. It may be

saved by the Group members in any meeting. There is no limit to be fixed by group; the

willing members can save whatever they can. This savings will attract interest for the

Group.

*voluntary savings can be taken back by the concerned member whenever the need

emerge.

2. Book Keeping of SHGs & their Federations

Books of records should be simple so that the community is able to manage it.

Recording of financial transactions of the SHG is called accounting. It is very important for any

institution. The meaning of accounting is to write all the financial transactions on the basis of

evidential documents that may be internal or external.

This is the need of the project that the Books will be understood by the literate or semi-literate

person so that they will be in a position to write such books and communicate in simple language

to the community.

Need for bookkeeping-

1. For creating belief among interest group

2. Transparency enabling the activity of organization by all stakeholders

3. Legal compulsion- in the context of CBOs-bank linkage

4. It takes the form of records

5. To facilitate good governance

6. Helping to take the decision to take the decision to strengthen the financial health

Files and Documents

A. SHG level- Utilization certificates (as per requirements), Loan application forms

B. VO/ CDO level- Payment voucher file, MOU file, Micro-plan file, Report file,

Correspondence files etc.

Report From SHG To VO (Monthly)

No of meeting held

Member Attendance

Member Savings

Member wise Repayment

Member wise loan Outstanding

RF/CIF received

Bank loan Received

Repayment to bank (if loan outstanding)

Member wise New Loans issued

Total Income - Expenditure

When to be written

1. Books of Account

a) SHGS : Formal books of account designed for the purpose will be handed over

to SHGs after three months of its formation

b) VOs : will be written in the formally designed books of account from the very first

day of transaction in the vo after its formation.

BY WHOM

SHGs -- by member or book keeper -- supported by staff for initial 3 months

VOs -- by the book-keepers

No SRLM staff will continue to write the Books Of Accounts beyond 3 months and the

responsibility of book keeping to be transferred to SHG members.

3. Opening of Saving Account in Bank by SHG

SHG should open a SB A/c with the nearest Bank branch ideally within three month of

formation of the Group. No limitation of the service area is applicable on SHGs for opening

savings bank A/C (Refer RBI/NABARD circular on service area approach).

Steps to be observed for opening the saving bank account:

NB: A copy of the relevant Circular from RBI regarding the opening of SB A/Cs of SHG is

annexed.

Designated signatories of the SHG S/B account are required to comply with the KYC Norms.

Following documents are required for the KYC

1. Proof of identity ( Any one of the documents to be submitted)

Voters card

Aadhar card

Resolution by SHG to open bank account at selected bank branch

Authorization of the three Office Bearers to operate the Bank account on behalf of all members with the condition that money can be withdrawn with signature of any two Office Bearers

Rubber stamp of SHG

SHG should comply with following norms of Bank

- Sunmission of duly filled SB A/C opening form

- Submission of document relating to residential proof of Office Bearers

- Submission of document relating to identity proof Office Bearers

- Photographs of the Office Bearers (2 copy each)

SHG preferably may open 'No Frill Account' with zero balance *

MGNREGS Job card

Any card with photograph, that is issued by the government department as ID card

is accepted by the banks

2. Proof of Address

Voters card

Aadhar card

MGNREGS card

Electricity bills

Precaution & transparency

(i) While operating the bank account the group members should depute an ordinary

member along with the office bearers for ensuring transparency and development

of trust among the Office Bearers and ordinary members.

(ii) It will also be a first step towards the financial literacy.

(iii) The group should collect the Pass Book from the Bank within time period and

should get it regularly updated.

(iv) The Pass Book along with the cheque book, if any, should be kept in safe custody

in the manner as to decided by the group.

Facilitator tips for opening of SB A/Cs of SHG

Ideally ‘Bank Mitra’ if placed at the bank branch level should facilitate opening of

SB A/Cs for the SHG.

Till the Bank Mitra is placed at the branch, Village level front line workers should

ensure filling up of application form along with all necessary support documents.

Follow-up at the branch level should be done by Block/ District level specialist on

Financial Inclusion.

Ideally, SB A/C opening of SHGs should be done in batches, of not less than 10

SHGs on each occasion.

SB A/C opening of SHGs may be done on a designated day mutually agreed with

Bank Branch Manager

Some transaction among the SHG and bank should be encouraged after opening of

savings bank account

Note: The Project Staff should make effort for opening of individual SB A/Cs of all the

members of SHG , at the nearest Bank branch to ensure Universal Financial Inclusion.

4.Grading of SHGs

Grading is an exercise performed by entity for evaluation / assessment of the health / performance

/ strength of the SHGs.

Grading of SHGs in Intensive Blocks:

Type of

Grading

Purpose of the Grading Indicative Timing of

the Grading

Who will Grade?

1st Grading

For judging readiness

/eligibility of the SHG to

receive RF/ICF

3-4 Months or on

submission of Micro

Plan/priority Plan from

the date of formation of

the SHG

VO/ CRP/ Community

Representative with

assistance from SRLM

staff

2nd

Grading



receive Bank Credit

6 Months or before

application for Bank

linkage from the date of

formation of the SHG

Branch Official/

Authorized

representative(preferabl

y of the project) of

Bank,VO/ CRP/ involve

VO?

3rd

Grading For judging readiness


receive Community

Investment Fund

9 Months from the date

of formation of the

SHG

VO/ CRP/ Community

Representative with

assistance from SRLM

staff *VO should conduct the assessment of the member SHGs in the monthly meetings based on

the monthly report submitted by SHG

Grading of SHGs in Non-Intensive Blocks:

Type of

Grading

Purpose of the Grading Indicative Timing of

the Grading

Who will Grade?

1st Grading



receive RF/ICF

3 Months from the

date of formation of

the SHG

Block Nodal Officer

for SGSY

2nd

Grading



receive Bank Credit

6 Months from the

date of formation of

the SHG

Branch Official/

Authorized

representative of

Bank

How will the process of Grading be carried out?

Grading exercise is conducted with the help of grading sheet containing performance indicators

based on the practice of Panchasutra. If the SHG gets at least 60% marks in the grading exercise

then it is considered that the SHG has passed the grading exercise.

Micro Plan Preparation

Definition of Micro Plan (MP):

Micro planning is a process where members are encouraged to recognize, understand and

evaluate their resources; analyze challenges they face; identify needs and make future plans to

overcome vulnerabilities by making optimum utilization of resources and fostering

convergences.

Objective:

1. To instill a sense of confidence among SHG Members about their own capacity to

improve their quality of life

2. To facilitate SHG Members recognize and understand their resources (individual and

common)

3. To facilitate SHG Members identify the challenges they face and analyze their causes

4. To enable SHG Members systematically prepare short-term and long term goals and

also develop a sense of ownership on the goals set

5. SHG Members list needs/ support required (financial; technical and convergence) for

achieving the goals set and also identify sources of support

6. To enable SHG members linkages with Government sponsored welfare and

development programmes

7. To motivate members to progress on the way towards economic and social

empowerment

SHG Level Process VO Level Process

Who will

Discussion on objective of MP with SHG by Facilitator (Ensure Participation of all members)

Discussion on individual Members’ Household profile (Family members, education, health status, Physical status, Occupation, Resources, Assets, Liabilities, access to entitlements, outstanding debts, food security issues, special category)

Discussion on individual Members’ &

Householdfuture plan in group

Sharing/ Discussion on the future plan by each members to overcome hurdles

Discussion on each member profile in group – identify current challenges/ hurdles faced

Ask members to prepare/confirm their plans with their family members (immediate & long-term plan)

Prioritization of on individual Members’

plan

Assessment of needs for execution of individual Members’ plan (Financial needs; technical support needs; convergence support needs)

Prioritization of needs of individual

Members’ at group level

Release of fund to SHG

Discussion on sources of needs (Financial;

technical; convergence)

Application to BMMU/VO for appraisal &

sanction

Consolidation of needs of individual Members’ plan in diff groups at VO – sector wise (Financial needs; technical support needs; convergence support needs)

Appraisal of MP submitted of each Group by loan committee of VO/ BMMU

Grading of group by facilitator

Utilization check of fund by loan committee

Submission of UC by SHG to BMMU/VO

1st M

eeti

ng

2n

d M

eeti

ng

(Wit

hin

7 d

ays

of

1st m

eeti

ng)

Within 1 month of receipt of fund

With

in 1

5d

ays of ap

plicatio

n

Receipt of fund by SHG from VO; Disbursement of fund to members as per MP

Application by VO to BMMU for release of funds

Flow Chart for Micro Plan Preparation

Filling of microplan in MP format

Who will facilitate MP ?

Initially by trained Project Staff (District/ Block/ Cluster Level)

Eventually, by trained CRPs , Community Mobilizers or Trained Members of the

VO

NB: During the initial Phases, two or more project staff/ community representatives together

should facilitate preparation of micro plan. Only after gaining considerable experience

(preparation of 4-5 micro plans), single project staff/ community representatives may also

facilitate preparation of micro – plans

When?

To be done primarily in the resource and intensive blocks

Minimum 2 month old SHG (Process should be initiated after at least 8 meetings

by SHG)

Micro-plan to be reviewed annually or at any time before infusion of external

funds in SHG(micro plan for HH in first phase. Micro Plan member specific in

subsequent phases?)

Eligibility for Micro – Plan preparation(Triggers)

SHG following Pancha Sutra (Regular Meeting; Regular Attendance; Regular

Savings; Inter-loaning; Regular Updation of books of record)

SHG received the basic training (Orientation; Leadership Development)

Saving Bank A/C of SHG opened

How ?

[Refer flow chart for Micro Plan Preparation]

SHG Level Process

SHGs fulfilling the eligibility criteria for Micro-Plan for training cum meeting on micro-

plan preparation should ensure participation of all members in the meeting. The household

profile of SHG members should include member wise details on - Family members

(earning/ dependents), education qualification, Occupation, Resources (private and access

to common resources) , Assets, Liabilities, access to entitlements, outstanding debts, food

security issues, special category( physically/ mentally challenged, vulnerable group )

Members should identify the challenges they face in life. Special attention should be

taken to facilitate members differentiate between symptoms and challenges/ problems.The

members should be encouraged to share their plan (short-term & long-term) to overcome

the challenges. The fundamental principle is ‘poor have innate abilities to overcome the

challenges’ and have plans for the same.

1. Member should discuss proposed plans at family level and finalise accordingly.

2. The second meeting of the SHG for micro plan preparation should be done within 7

days of the first meeting.

3. Each Member may share multiple plans. Prioritization of the individual plans should

be done for systematic implementation

4. After prioritization of individual level plans, members should be encouraged to share

the needs/ support requirement for execution of plan. At this stage no commitment for

any support from the project should be shared.

For financial support requirement, facilitation is required to separate own contribution

and credit requirement. Members seeking credit should be facilitated to analyze

outstanding credit and their repayment ability.

5. Prioritization of the needs among members in the group should be done. Careful

facilitation is required at this stage. The principle for prioritization will be ‘Poorest

First’. In the first round, for requirement of 3-5 members’ Equal distribution of any

financial assistance or credit support should be discouraged. Members on subsequent

priority should have an idea on when (may be in months) they would get the support.

6. Discussion on the sources of support may be taken up. At this stage the facilitator

should explain the support that the SHG may receive from the project level support.

7. Filling of the micro-plan in MP format (In duplicate). (MP Format developed by

BRLPS annexed).

8. Grading (Refer Grading Format – 1) of the SHG submitting the MP by facilitator and

application to VO. In case VO is absent the application may be sent to BMMU.

9. After receipt of funds from VO/ DMMU the SHG should disburse the funds among

members as per the micro plan prepared and submitted. In case deviations are done,

this should be noted in the minutes book of the SHG.

10. Within one month of receipt of fund from VO/DMMU, the SHG should submit

Utilization Certificate for funds to VO or to BMMU

VO Level Process

1. Appraisal of the MP should be done by the Loan Committee at VO. In case VO is

absent appraisal of the MP should be done by the loan committee at BMMU level. It

should be taken care that during the appraisal process, the community representative

should be involved.

2. Sector wise consolidation of individual members’ needs should be done at the VO/

BMMU level for initiating related intervention.

3. VO should make application to CLF for release of funds. In case VO & CLF is absent,

application will be sent by BMMU to DMMU.

4. The release of fund to SHGs should be done within 15 days of submission of MP to

VO/BMMU

5. Utilization check of the funds given to the SHG should be done by the Loan committee

at the VO. In case VO is absent, BMMU should conduct this process. Utilization check

of the funds given to the SHG should be done by the Loan committee at the VO. In

case VO is absent, BMMU should conduct this process.

Role of Facilitator: Do’s & Don’ts in MP preparation

Do’s

1. During the meeting for MP preparation with SHG, facilitator should make efforts to

create an environment where members can open up and have uninterrupted discussion.

2. Facilitator should ensure active participation of all members during MP preparation.

3. Facilitator should ensure that the facts shared by members are correct and should be

vetted by other members in the group

4. Facilitator should ensure that during MP preparation along with discussions on

financial aspects, discussions on social issues and convergence requirements be taken

up

5. The facilitator should ensure that interest of the poorest members in the group is not

undermined

6. MP preparation should be completed within stipulated time. However care should be

taken not to fast pace the process

7. Facilitator should ensure that all discussion and decision taken during the process is

documented and incorporated.

8. The final version of the micro plan should be read out to the group and changes if any

should be incorporated.

Don’ts

1. Facilitators should not impose her/his ideas or decisions on the group during

preparation of the micro-plan

2. The facilitator should not conduct MP preparation without clearly explaining to the

group about the objective of MP preparation.

3. MP preparation should not be completed without finalization of repayment plan of

each member

6. Fund management in Community Institutions

There are two types of funds for the community from the project:

1. Revolving Fund

NRLM would provide a Revolving Fund (RF) support to the SHGs (SHGs that have not received

any RF earlier), as corpus, with a minimum of Rs. 10,000 and up to a maximum of Rs. 15,000 per

SHG. The RF support, besides meeting consumption and initial production needs, would also

build institutional capacities of SHGs in managing loans and funds.

Eligibility to avail RF-

SHGs should belong to the poorest of the poor category as per the norms decided by the

SRLM for mobilization of the poor;

SHG should be in active existence at least since the last 3 months;

The members attendance in the meetings is at least 90% or above

SHG should be practicing ‘Panchasutra’ i.e. Regular meetings; Regular savings; Regular

inter-loaning; Timely repayment; and Up-to-date books of accounts;

The repayment rate should be 95% or above

All members of the SHGs have received member level training

The SHG should have a trained book-keeper (book keeper could be from within the SHG or from

outside depending on the decision of the SHGs)

Have not availed Revolving Fund earlier, under SGSY

SHG should have Savings Bank A/C

Routing of RF-

The SHG will apply for RF to VO. [In intensive blocks, the MP prepared also will be attached]

The VO will assess the performance of SHG (adherence to PanchaSutra)

In intensive blocks the VO will also assess the MP prepared (Criteria for assessing MP is given

below)

In case VO is not formed, the release of funds will be done directly to the SHG by the DMMU.

However in every stage of assessment of SHG and their MP, a loose VO or Community

Representatives should be involved.

2. Community Investment Fund(CIF)or Seed Capital

CIF is a catalyst for improving their livelihoods and quality of life of the poor communities. This

may be supported further by leveraging finance from commercial lending institutions.

The CIF could be used by the SHG for:

Undertaking the productive livelihood enhancing activity

Vulnerability reduction of the poorest such ass community managed food and health

security interventions

Improving access to social safety nets and entitlements

Promoting access to formal financial services for the poor

Providing small grants to the destitute, old and the disabled in extreme poverty to meet the

emergency needs

CIF may be divided into two components primarily -

Livelihood Fund: It consists of financing both farm and non-farm activities and service

sector activities. This can be used as working capital for small enterprises also.

Vulnerability Reduction Fund: This fund can be used for the purpose of reducing the

vulnerability and risks faced by the disabled and vulnerable in the village. The SHGs

which have prepared vulnerability reduction plan in MP can avail this fund.

CIF may be sub divided into livelihood fund and Vulnerability Reduction Fund in the proportion -

Livelihood Fund- 90% of CIF, Vulnerability Reduction Fund-10% of CIF based on the local situation

Eligibility of the SHG to avail CIF-

The SHG should be a member of VO

Group have completed at least 6 months after its formation

‘A’ graded SHGs

SHGs which have prepared Micro Plan

SHGs which had undergone basic training on fund management

Eligibility of the VO to avail CIF-

Village Organization must have completed 3 months

VO leaders must be selected and EC and sub-committees must have been constituted in

VO

VO should have Bank A/c

VO Office Bearers and Executive committee members should have undergone basic

training on VO and fund management

Bookkeepers for VO have been placed and trained. VO must introduce minimum required

documents- Minute book, Cash Book etc.

The CIF fund is released from DPMU to VOs as a capital for

the member SHGs to cater the needs of livelihood of SHG

members. The maximum amount will be Rs 50000 per SHG.

Infusion of various funds in SHGs

Criteria for allocation of funds from DPMU to VO-

This fund will be utilized as per the key non-negotiable principle of project. Each VO can receive

the first allocation of Rs.5 lakhs approximately which in turn VO reallocates to member SHGs

judiciously based on following criteria-

1. No. of SHGs in the VO

2. Percentage of vulnerable households (VO with higher percentage will be given priority)

3. No of ‘A’ grade SHGs in VO

4. Regular meeting of VO

5. Attendance in VO meeting

6. Repayment performance from member SHG to VO (if CIF has been sanctioned earlier)

7. Books of records introduced

8. Percentage of SHG having received basic training

9. VO formalized a monitoring committee for assessment of performance of member SHGs

10. VO members received basic training

Criteria for allocation of fund from VO to SHG-

1. “A’ grade SHG will only be considered

2. SHG will higher number of members in the vulnerable category will be given priority

3. The SHG should have availed RF

4. Received basic training

5. The SHG has prepared Micro Plan (SHG with MP in which more than 50% of share goes

towards livelihood will be given priority)

Flow of livelihood funds among various Community Institutions

Uses of Fund

Phase 1 Phase 2 Phase 3

Suggestive Repayment and applicable interest rate on Livelihood Funds

RFLivelihood

Fund

Vulnerability reduction

Fund

Rate of interest (Suggestive)

SHG

SHG

VO

12 %

Members

24 %

36 installments

24 installments

Repayment (Suggestive)

SHG CLF

SHG 6o installments 6 %

Directly given to SHG Through Village Organization to SHG

After 3 months After 6 months of forming VO

Average Rs. 10000-15000

Purpose- To meet the

emergency needs,

consumption needs, high

interest debt swapping,

small micro-enterprises

,credit history

Average Rs. 30000-40000 per

SHG

Purpose- To support livelihood,

assetization, working capital,

high interest debt swapping,

Maximum Rs. 10000 per SHG

Purpose- To reduce

vulnerability of the SHG

members-

Food security, health risk,

community based

rehabilitation of disable SHG

members

Credit Linkageof SHGs

Vision of NRLM: Every Household to be able to access a credit linkage of

Rs 1 lakhover 10 year period

Type of credit products available for the SHGs

Cash Credit Limit (CCL) : Loan limit may be sanctioned by the bank for a period of 3-5

years based on the projected savings of the SHGs. Drawable limits for SHGs are fixed

annually with aggregate ceiling of actual savings in SHGs.For calculation of the CCL,

refer to the Annexure

Term loans:Term loan is a loan that has been sanction for a specific period of time with a

regular interval of repayment.

Purpose of Bank loan: Loan granted by the bank to the SHG is purpose neutral as the group

decided the purpose for which the loan could be given to its members. As indicated by RBI in its

circular (Refer RPCD.FID.BC.no.06/12.1.001/2011-12,dated 1st July 2011) The banks are

expected to meet the entire credit requirement of SHG members for (a) Income generation

activities (b) social need like housing education marriage, etc and (c) debt swapping. (Refer

Annexure: SHG2: revisiting the SHG Bank linkage program, 27 March, 2012)

First credit linkage of the group: The first credit linkage that can be availed by the SHG is 3-4

times of the SHG corpus or Rs 50,000 whichever is higher.

Preparation for the Credit linkage at the SHG level:

Internal assessment on SHG meeting eligibility criterion for credit linkage (can be done by

VO or the SHG members themselves)

Preparation of the Micro Plan. If Micro Plan is already prepared, which could be possible

in the existing groups, the micro plan should be reviewed. Also, assessment should be

done for the demand of credit needs from the banks.

Resolution by the SHGs for taking bank loan (resolution to be mandatorily entered in the

minutes register)

Filing of the documents- inter-se agreement, loan application form

Invite Bank manager for grading ofthe SHGs

Visit to bank branch for completion of documentation formalities (only selected

representatives should visit the bank branch )

Process of Bank linkage:

Key tasks to be performed by SRLM to leverage credit for SHGs from Banks:

At State Level:

Work with SLBC and NABARD to set-up the sub-committee on SHG-bank linkage in the

SLBC. This sub-committee will ensure regular monitoring of the SHG-Bank linkage on a

monthly/quarterly basis

Regular participation, review and analysis of the SHG-Bank linkage at the SLBC meetings,

preferably with the Mission Director

Coordinate Bankers Sensitization programfor the Controlling officer of the banks with

NABARD/ BIRD. The program should incorporate classroom and immersion visit trainings,

preferably. (The invitation for chief officers of bank should go from the office of Mission

Director)

Regular review of the Bank Linkage status at the State Level

State Missions with District Team should attend DLRC meeting on a rotational basis.

Annual Credit target planning to be done at the state level using the bottom-up approach and

getting the Credit target approved in the SLBC meeting.

Advocate for uniform documentation for the SHG-bank linkage &MIS reports with SLBC and

institutionalize the same through controlling offices of various banks

Capacity Building of the district level project staff

At District Level:

Review and analysis of the status of SHG-bank linkage in DLRC/DLCC meeting

regularly. A monthly/quarterly report to be submitted

Regular, interactions and meetings with the DDM, LDM and branch managers in the

district(preferably monthly or bi-monthly)

Coordinating the sensitization program for Branch Managers (exposure visits)

Review of the Block Team on SHG-Bank linkage. Collating Data from the VO/CLF and

BMMU and preparation of relevant reports for SPMU/ SLBC sub-committee

District Level Staff should attend BLBC meetings regularly.

At Block Level:

Attending BLBC meetings regularly.

VisitingBank Branches within the Block regularly for identifying Branch Specific issues

for Bank Linkage.

Saving linkage and credit linkage planning with the Branch Manager

Meeting with the Office Bearers of Federations/SHGs and community RPs to identify

issues related to Bank Linkage.

At Sub-Block/ Cluster Level:

1styear:

• Identification of bank branches at block and cluster level

• Meeting with branch managers along with district/ block managers

• SHG bank A/c opening as per the branch level linkage plan

• Internal assessment on SHG meeting eligibility criterion for credit linkage (can be

done by VO or the SHG members themselves)

• Preparation of the Micro Plan. If Micro Plan is already prepared, which could be

possible in the existing groups, the micro plan should be reviewed. Also, assessment

should be done for the demand of credit needs from the banks.

• Resolution by the SHGs for taking bank loan (resolution to be mandatorily entered in

the minutes register)

• Filing of the documents- inter-se agreement, loan application form

• Invite Bank manager for grading of the SHGs

• Visit to bank branch for completion of documentation formalities (only selected

representatives should visit the bank branch )

• Credit linkage of SHGs as per the linkage plan

• Monthly Monitoring of repayment to bank through VO

.

2nd

year:

• Promoting CRP on Financial Inclusion (bookkeeping trainers/ community auditors/

Bank Mitra)

• Assessing the eligible SHGs through VO for repeat credit linkage

In coordination of bank manager- a particular day every week can be dedicated to SHG

bank linkage activities in which applications of SHGs can be processed in bulk

In Non-Intensive Blocks, the block level & Cluster level tasks is expected

to be performed by Extension Officer (SGSY), identified Block level

facilitators, CRPs, selected NGO representatives

Frequently Asked Questions

1. Can defaulters be member of SHGs? Will such SHGs will be able to avail the loan?

a. In case the family member/relative of the SHG member is a defaulter, the member

will not be considered as a defaulter

b. In case the family member/relative of the SHG member is a defaulter, it should not

come in the way of bank financing the SHGs

c. The banks can lend to the SHGs with a few individual members as defaulters

2. Can SHG open bank account in non-service area branches?

Yes

3. Will SHG be issued only the CCL or Term loans?

An SHG can avail either CCL or the Term loans, as per their requirements

4. Which date must be taken as the first date for 6 months?

The date of resolution on formation of the SHG should be considered as the first

date for all purposes(as noted in the minutes register)

5. What is the interest rate applicable for the SHG bank loans?

Govt. of India is planning to launch a scheme on ‘interest Subvention’ for SHGs

loans from banks. The SHGs are expected to get the credit from banks at 7% rate

of interest.

6. What are the documents required for Credit linkage of SHG?

a. Resolution by the SHG members

b. Inter-se agreement to be executed among the members of the SHGs

c. Application to the Bank

7. What is the duration for repayment of bank loan?

a. In term loans , the repayment must be made as per the repayment schedule in the

banks

b. In CCL, the principal loan outstanding of the SHG must be fully paid to the banks

once a year. The interest amount should be paid on a monthly basis. TO AVOID

DEFAULTS and encourage a good repayment culture in the SHGs, the project

staff must ensure that repayment(principal and interest) is made by the SHGs as

per a decided schedule on a monthly basis.

8. Is there any processing charge/stamp duty for the loan to the SHGs?

a. No processing/service charges is levied by banks for loans to SHGs

b. Stamp duty is a state jurisdiction and can be clarified by the SRLMs at the SLBC

level. SRLM may also take the initiative to consult the state for waiving off the

stamp duty.

9. Is collateral required for availing the loans?

a. No collateral is required for the loans upto10 lakhs

10. If CCL can be merged with the S/B account?

All SHGs must maintain the SB account and the CCL accounts separately. Without

the information of the SHGs, the repayment for the CCL should not be adjusted

from the SB account, by the banks.

11. Will bank issue the loan pass books?

a. Yes, SHGs must insist for the loan pass books to be issued by the banks

Annexure-

Notes of strategic meeting with bankers and formation of sub-committees

Uniform Guidelines for Credit Linkage of SHG with Banks prepared by the Gujarat

SRLM in consultation with SLBC.

Suggested format for review of SHG-Bank Linkage program at various levels.

Circular no: 65(A)/MCID-04/2011-12, issued on date- 27th

March. 2012. “SHG2:

revisiting the SHG-Bank linkage program”

Capacity Building on Financial Inclusion

Target Groups Resource Person/ Trainers

State Staff MoRD/NMMU/ Experts

District Staff Pool of trainers at State

Block Staff District Level Staff / Resource Organizations

Community Facilitators (CMs/ SHG Book keepers,

VO book keepers)

District Level Staff / Resource Organizations

Bankers NABARD/BIRD , exposure visits to be organized for the

branch managers accompanied by the staff

Other stakeholders viz line departments SRLM

FI Staff in Intensive Districts/ Blocks: One FI specialist at each State, District and Block level

Staff in Model Non-intensive Block:

EO (SGSY) for all activities in the non-intensive blocks

1 CC to work intensively for strengthening the pre-existing SHGs to adopt Panchsutras –

Need to be trained to develop the resources i.e. BKs from within the community

EO (SGSY) for bank linkages and line departments

Capacity Building for Staff Orientation– for the staff of each vertical in SRLM/DMMU/BMMU

Technical training – for the Financial Inclusion specific staff at SRLM/DMMU/BMMU

Separate training modules according to the needs of the SHGs, Book keepers and Staff will

be applicable in the technical trainings

For example – Training on SHG-bank linkage: For state it will consists on documents of

bank, analysis of SHG-bank linkage and policy circulars but for the block level staff and

Community staff and communities it will involve the operational aspects of all

documentations related to banks

Duration (in days) of the various training programmes at different level

State District Block CC BK , VO BK,

SHG

SHGs

Financial Inclusion in NRLM 2 2 1

Book keeping1 2 5 5 5 5 5

Grading of the SHGs 1 1 1 1

Fund Management** 1 1 2 2

Micro planning exercise 1 3 3 3 3

SHG-bank linkage 1 1 1 2 2 2 2

Auditing systems * 1 2 3 3 3 3 1

Financial Literacy and credit

counseling2

1 2 2 2 2 2 2

* 1 year after the program initiation

**Fund Management training applicable for FI specific staff and also the Finance person at the

State/District Level

1: Refresher training of 5 days to be provided for Block staff and book-keepers after 4-5 months.

VO bookkeeper to be trained on the VO bookkeeping

2: Financial Literacy refresher trainings every 6 months

Schedule of the various training programmes at different level

State District Block CC BK , VO BK.

SHG

SHGs

Financial Inclusion

in NRLM

Orientation Orientation Orientation

Book keeping After

Immersion ( 1-

2 months)

After

Immersion ( 1-

2 months)

After Immersion

( 1-2 months

Joining Joining Joining

Grading of the

SHGs

After

Immersion ( 1-

2 months)

After

Immersion ( 1-

2 months)

After Immersion

( 1-2 months

At Joining Joining Joining

Fund

Management**

After

Immersion ( 1-

2 months)

After

Immersion ( 1-

2 months)

After Immersion

( 1-2 months

Micro planning

exercise

After

Immersion ( 1-

2 months)

After

Immersion ( 1-

2 months)

After Immersion

( 1-2 months

Within 2-3

months

Within 2-3

months

SHG-bank linkage Orientation Orientation Orientation Joining Joining Joining

Auditing systems * After 1 year of program initiation

Financial Literacy

and credit

counseling

Orientation Orientation After Immersion

( 1-2 months)

Within 7-8

months

Within 7-8

months

Within 7-

8 months

Within 7-

8 months

Training programmes in intensive & non-intensive blocks

NB: Broad contents of each training programme is annexed

Training strategy for the Financial Inclusion

Trainings Under Financial Inclusion Training in the intensive

Districts/ block

Training in the non-intensive

Districts/ blocks

Orientation: Financial Inclusion in NRLM

SHG Account Keeping

Grading of the SHGs

Fund Management

Micro Planning

SHG-Bank linkage

Financial Literacy – ICT enabled, products,

services, others

State level

Training of the district level

staff / ToTs

Training of the Block level

staff

MoU with a Resource Organization

Training of the Community/

community institutions

Sensitization of the

Bankers- Controlling officer

of the banks

Sensitization of the Bankers

– LDM, DDMs, Branch

managers

Exposure Visits of bankers

accompanied by the staff

Pool of trainers at State level (2-3)

Pool of trainers at

District level (5-6)

Pool of trainers at

Block level (5-6)

Training of the Community

Coordinators

(Specimen of grading tool for 1st, 2nd

and 3rd

grading are enclosed in Annexure-I, II and

III.)

Annexure-I

Format for 1st Grading Exercise

Name of the SHG: Name of the GP: Name of the Village: Name of the Block: Date of formation of the SHG: Whether the Group has completed six months of its existence or not: (Please Note that this Grading is to be carried out only when the SHG attains the age of 6 Months or more)

S.N

. Grading Indicators

Allotted

Marks Formula / Criteria for allocation of Marks

Obtaine

d Marks

1 Holding Meetings 20 Total no. of meetings actually held during last 6 months X 20

No of meetings required to be held during last 6 months as per rule of the SHG

2 Attendance in

Meetings 20 Average no. of members actually attended meeting during last 6 months

X 20

Total no. of members of the SHG

3 Regularity of

Savings 20 Amount of savings actually collected during last 6 months X 20

Amount of savings required to be collected during last 6 months

4 Inter Loaning 20 Total amount of loan disbursed during last 6 months X 20

Total amount of saving fund

5 Writing of Minute

Book 20

Minute Book is well documented and is up to date 20

Minute Book is not well documented but is up to date. 15

Minute Book is well documented but is not up to date 10

Minute Book is not well documented and is not up to date 5

No Minute Book is in place 0

Total 100

Name Designation Organisation Signature

Remarks: The SHG has passed / not passed* the grading exercise (*Strike out which is not applicable)

Date of Grading:-

Particulars of the person who has conducted the Grading

Annexure-II

Format for 2nd Grading Exercise

1. Name of the Bank: 2. Name of the Brach: 3. Name of the Taluka/GP: 4. Name of the SHG: 5. Date of formation of the SHG: 6. Date of opening of SB A/c of the SHG: 7. SB A/c No:

Whether the Group has completed 6 (six) months of its existence or not: (Please Note that this Grading is to be carried out only when the SHG attains the age of 6 (six) months or more)

S.N. Grading Indicators Allotted Marks Marks Obtained

1

Meetings Conducted a) Regular two meeting every Month

10

5

b) At least 10 meetings in the last 6 month

5 c) Less than 10 meetings in the last 6 months 0

2

Average Attendance

a) More than or equal to 80% 10

b) Less than 80% but more than 60% 5

c) Less than 60% 0

3

Savings pattern of the members of the Group

a) More than 90% members contribute to the savings 10

b) Between 60% to 90% contribute to the savings 5

c) Less than 60% members contribute to the savings 0

4 Lending

a) More than 75% of the total corpus is utilized 20

b) More than 60% but less than 74% of the total corpus is

utilized 10

c) Less than 65% of the total corpus is utilized 0

5.

Recovery of Loans

a) Recovery rate is more than 90% 20

b) Recovery rate is between 70% to 89% 10

c) Recovery rate is less than 70% 0

Annexure-II( Contd..)

Page 2.


6.

Maintenance of Following Books /Records 1. Attendance and Minutes Book. 2. Cash Book 3. Savings and Loan Registers. 4. Individual Pass Book.

a) Above Books of Records maintained updated 1.

a) Above Books of Records maintained updated

20 b) Above Books of Records are partially updated 10 c) Above Books of Records are not updated 0

TOTAL MARKS 100


Date of Grading:-



Annexure-III

Format for 3rd Grading Exercise

1. Name of the Bank: 2. Name of the Brach: 3. Name of the Taluka/ GP: 4. Name of the SHG: 5. Date of opening of SB A/c of the SHG: 6. SB A/c No:

Whether the Group has completed (9)nine months of its existence or not: ( Please Note that this Grading is to be carried out only when the SHG attains the age of 9 (nine) months or more)


1

Meetings Conducted a) Regular two meeting every Month

10

5

b) At least 10 meetings in the last 6 month

5 c) Less than 10 meetings in the last 6 months 0

2

Average Attendance

a) More than or equal to 80% 10

b) Less than 80% but more than 60% 5

c) Less than 60% 0

3

Savings pattern of the members of the Group

a) More than 90% members contribute to the savings 10

b) Between 60% to 90% contribute to the savings 5

c) Less than 60% members contribute to the savings 0

4

Lending

a) More than 75% of the total corpus is utilized 20

b) More than 60% but less than 74% of the total corpus is

utilized 10

c) Less than 65% of the total corpus is utilized 0

5.

Recovery of Loans

a) Recovery rate is more than 90% 20

b) Recovery rate is between 70% to 89% 10

c) Recovery rate is less than 70% 0

Annexure-III( Contd..)

Page 2.


6.

Maintenance of Following Books /Records 1. Attendance and Minutes Book. 2. Cash Book 3. Savings and Loan Registers. 4. Individual Pass Book.

b) Above Books of Records maintained updated

20 c) Above Books of Records are partially updated 10 d) Above Books of Records are not updated 0

TOTAL MARKS 100


Date of Grading:-

