Cabinet gives approval for Women Self Help Groups to get low interest loans

In order to financially strengthen Women Self Help Groups (SHGs) across India, the Union Cabinet has approved key changes to the National Rural Livelihoods Mission (NRLM), aiming to eradicate poverty in villages by empowering women. Rural Development Minister Jairam Ramesh announced on Monday that over 25 lakh Women SHGs will now be provided bank loans at an interest rate of seven per cent.

In accordance with the announcement made by Finance Minister P. Chidambaram in the 2012-13 Budget, the Union Cabinet on May 1 approved the provision of interest subvention for Women SHGs operating under the NRLM, ensuring that they shall avail loans up to Rs. three lakh at an interest rate of seven per cent per annum.

Initially, the scheme will be started as a pilot project in 150 districts, including the 82 Integrated Action Plan districts affected by naxal violence; and in the rest of the States, 75 per cent of the cost would be borne by the Central government and 25 per cent by the States.

“In 150 districts, all Women SHGs, which are now getting bank loans at 11.5 to 14 per cent rate of interest, will now get it at seven per cent rate of interest,” said Mr. Ramesh.

Additionally, Women SHGs that repay loans in time will enjoy an additional three per cent subvention, thereby reducing the effective rate to four per cent. In the 150 districts, the Central government will bear the entire cost of the interest subvention from the market rate to seven per cent.

The total cost of the project is around Rs.1,650 crore for 2013-14, out of which, Rs.1,400 crore shall be borne by the Central government and Rs. 250 crore by the States.

“Over the next five years, we will move to a situation where the entire cost will be borne by the Centre,” added Mr. Ramesh.

In order to improve targeting, the Cabinet has decided to do away with the BPL (below poverty line) category in the NRLM, and instead identify target groups through the Participatory Identification of Poor (PIP) process, at the community-level.

Currently, there are nearly 25 lakh Women SHGs in the country, with nearly three crore members and over the next five years, the number is expected to increase to seven crore.

Mr. Ramesh has proposed a separate Nabard-like institution in order to promote Women SHGs to the Finance Minister.

The NRLM was launched by UPA chairperson Sonia Gandhi in June 2011 — a poverty reduction programme based on employment generation by adoption of a multi-pronged strategy. The program aims at creating efficient and effective institutional platforms of the rural poor, thereby enabling them to increase household income through sustainable livelihood enhancements and improved access to financial services.