RBI hikes collateral free loans to SHGs under DAY-NRLM to Rs 20 lakh

The Reserve Bank of India on Monday notified the enhancement of collateral free loans to self-help groups (SHGs) from Rs 10 lakh to Rs 20 lakh under DAY-NRLM

The Reserve Bank of India on Monday notified the enhancement of collateral free loans to self-help groups (SHGs) from Rs 10 lakh to Rs 20 lakh under Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM).

The DAY-NRLM is the flagship programme of Government of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihoods.

DAY-NRLM adopts a demand driven approach, enabling the states to formulate their own state-specific poverty reduction action plans.

For loans to SHGs up to Rs 10 lakh, no collateral and no margin will be charged, the RBI said in a circular.

Also, no lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.

"For loans to SHGs above Rs 10 lakh and up to Rs 20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs," it said.

However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below Rs 10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).

The RBI issued the circular after the government recently notified amendments in the Credit Guarantee Fund for Micro Units (CGFMU) Scheme.