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| RBI paper moots special funds for self-help groups |
| Press Trust Of India / Mumbai Aug 10, 2009, 00:25 IST |
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A Reserve Bank occasional paper has mooted a special fund for self help groups (SHGs) to deal with regional imbalances in credit disbursement to poor, particularly in the eastern and central regions of the country.
At present, only one-fifth of the total loans to self help groups went into the eastern and central regions which accounted for more than three-fifth of the total poor in India.
The paper said that the average bank loans to SHGs in the western, eastern, northern, central and particularly in the northeastern region are much lower than their southern counterparts.
The RBI paper examined the outreach of Self Help Group-Bank Linkage Programme (SBLP) in the backdrop of growing banking and socio-economic divide between regions in India between 1996 and 2006.
The RBI occasional paper was authored by Department of Economic Analysis and Policy officials — Pankaj Kumar and Ramesh Golait. The views expressed in the paper are personal and not that of the Reserve Bank.
The paper said that out of the total credit disbursed by scheduled commercial banks, the smallest category of Rs 25,000 and below accounted for only three per cent (14.2 per cent in 1996) of the total credit outstanding in 2006.
The increasing share of the category above Rs 25,000 and up to Rs 25-lakh almost completely offset the shrinkage observed in the case of the smallest category of Rs 25,000 and below, it said.
The paper said that the direction of change in credit disbursal appears to be contrary to the objective of financial inclusion. SHG-Bank linkage programme was conceived to fill the gap existing in the formal financial network and extending the outreach of banking to the poor.
The spread of the SHG-Bank Linkage Programme in different regions, however, has been uneven on account of various factors like pro-active role of State Governments, presence of well performing NGOs, socio-cultural factors and better performance of SHGs, amongst others, the paper said.
The spread of SHG movement has been skewed in favour of the southern region especially in terms of the regions share in the total loans to SHGs linked to banks, it added. There is clear evidence of the fact that the SHG movement in India has spread to other regions or states, though not to the same extent as in the southern states. However, a major concern remains the scale of finance in the non-southern regions, the paper said. Further progress in the SHG-Bank linkage programme needs to reckon these regional variations in the spread of the programme, it said.
The paper said that when SHG spread is analysed with reference to poverty, the glaring differences between regions highlights the need for taking the SHG movement to the lagging regions. In order to reduce the regional imbalances in spread of the SHG-Bank linkage programme, NABARD identified 13 States Assam, Bihar, Chhattisgarh, Gujarat, Himachal Pradesh and Jharkhand, amongst others, which have a large population of the poor, for focused attention, the paper said.
Based on a mapping of SHG spread and poverty ratio, it is suggested that Bihar, Jharkhand, Madhya Pradesh and Uttar Pradesh need priority attention, it said. The paper suggested that policies should incentivise branch expansion in central, eastern and north-eastern regions. Besides, these are the regions where SBLP needs to be intensified, particularly in terms of disbursement of loans to the SHGs linked to banks, it said. Banks need to play a more pro-active role in identification of income generating activities as well as in encouraging NGOs promoting SHGs in the central, eastern and north-eastern regions which could give a fillip to SBLP. To encourage banks to take a keen interest in furthering the SHG movement, perhaps a scheme of performance-linked incentive could be considered, the paper said.
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