Consider the following statements:The Self-Help Group (SHG) programme was originally initiated by th

Question

Consider the following statements:The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.In an SHG, all members of a group take responsibility for a loan that an individual member takes.The Regional Rural Banks and Scheduled Commercial banks support SHGs.How many of the above statements are correct?

Accepted Answer

The origin of self-help groups (SHGs) can be traced back to the Grameen Bank of Bangladesh, founded by Mohamed Yunus. SHGs were started and formed in 1975. In India, NABARD initiated the SHG movement in 1986-1987. The absence of institutional credits available in rural areas led to the establishment of SHGs. The concept of self-help groups has evolved to organize the rural poor to meet their productive and consumption needs out of their savings.Though the cash credit facility is to be sanctioned by the bank to SHG, the sanction of credit by SHG to its individual members will be guided as per their terms and duration as decided by the groups. This is expected to remain unchanged and thus ensure the continuance of financial discipline at the member level.A few members of an SHG may graduate faster to start or expand economic activities requiring much higher levels of loans than required by other SHG members. In such cases, all other members may not like to stand mutual guarantee for a few large-sized loans. In such cases, a smaller Joint Liability Group (JLG) from members of an SHG may be created. The members of JLG will continue to remain members of the SHGs and continue to participate in the activities of SHGs as earlier.Banks may encourage the creation of such enterprise/livelihood-based JLGs as a separate entity. RRBs are key financing institutions at the rural level, which take the responsibility of fulfilling the credit requirements of Self Help Groups (SHGs). The RRBs also play a very crucial role in Self Help Groups (SHGs) - Bank linkage.Besides financing SHGs, the RRBs also play a vital role of serving as SELF HELP PROMOTIONAL INSTITUTION (SHPIs). Recognizing the importance of SHG Bank linkage, the Government has requested all scheduled commercial banks to follow the example set by some public sector banks and meet the entire credit requirements of SHG members.Linking of SHGs with banks has thus been emphasized in the Monetary Policy Statements of Reserve Bank of India and Union Budget announcements from time to time, and various guidelines have been issued to banks in this regard.Source Attribution: NABARD, Shodhgangotri