Budget 2025: Individual credit score boost for 100 mn SHG members

Tucked away as an innocuous para in the Budget document, it says "PSBs will develop a 'Grameen Credit Score' framework to serve the credit needs of SHG members, and people in rural areas"

A fantastic move in the FY26 Budget is the offer for almost 10 crore people, mostly in rural India, to get credit scores riding on the performance of self-help groups, or SHGs.

 

Tucked away as an innocuous para in the Budget document, it says “public sector banks (PSBs) will develop a ‘Grameen Credit Score’ framework to serve the credit needs of SHG members, and people in rural areas”.

 

A government official explained it as follows: Each bank has found that the track record of SHGs in repaying loans is exemplary. They have an almost 100 per cent repayment rate. But those exemplary numbers cannot be used by the individual members to avail bank loans as per current rules. Banking rules will now be changed to allow for a potentially huge jump in credit.

 

The idea was floated through two expert groups appointed by the finance ministry along with the rural development ministry in the current financial year (FY25) to make retail credit from banks reach deeper in rural and semi-urban areas, but without creating risks of bad loans.

 

The astonishing Budget para was based on their recommendations. It means that a bank can now use the credit score of an SHG to offer an individual credit score for its members — a Grameen Credit Score. While microfinance institutions do use some versions of this to offer loans, banks till now could not do so.

 

So, the next time a member of an SHG with a sterling track record walks into a bank branch, they can wave their cumulative credit score to demand a loan for themselves, individually on the same basis.

 

Already the rural development ministry has developed measures in collaboration with Government e-Marketplace (GeM) to create “SARAS Collection” for marketing of SHG products. Memorandum of understandings (MoUs) have also been signed with Flipkart, Amazon, and Meesho to allow SHG artisans, weavers, and craftsmen to access national markets.