Union rural development minister Jairam Ramesh has called for bringing women's self-help groups (SHGs) under the priority sector lending (PSL) norms, and increasing the credit flow to them.
"I want women's SHGs to get bank funds at the priority sector lending rates," Ramesh said last week.
"I don't want to put a %age number to bank funding for SHGs, because that won't make any tangible difference. What we need is ensuring availability of credit at affordable rates and that too at a time when they need it," he said.
He also called for expanding the reach of SHGs. "Over the next five years, I want to see the number of SHGs to rise from the present 45 lakh to 90 lakh, and that of the members to 10 crore women from the current 5 crore. This can happen only if bank funding goes up, as today 80 % of the bank funding to SHGs goes to those in the Southern states."
Currently, funding to rural SHGs does not come under the priority sector lending (PSL) norms of commercial banks. Banks have to lend 40 % of advances to the priority sector, which includes agriculture, MSMEs, weaker sections, education, and rural housing.
Ramesh further said, "National Rural Livelihood Mission will connect at least one woman from every poor household across the country with SHGs in the next five years."
Noting that the southern states of Andhra, Tamil Nadu, Kerala and Karnataka account of 70 % of the women SHGs and 80 % of credit flow, Ramesh said, "This is a highly geographically distorted scenario," and SHGs should spread.
Last year, bank credit to SHGs stood at Rs. 14,500 crore.
The focus of the new initiative will be on MP, Chhattisgarh, Jharkhand, Bihar, UP, Rajasthan, Gujarat and Maharashtra, the minister said. The ministry has set up a committee in this regard, which will give a report in June.
Nabard, which refinances banks that lend to women SHGs, will be creating a Rs. 1,500-crore fund to cater to the SHGs in these states, Ramesh said.
Calling for more flexibility in rural lending, Ramesh said flexibility was needed in lending to SHGs too.
"The SHGs require a variety of loans, which the public sector banks are not being able to cater to. As a result the poor are driven to microfinance institutions, who offer credit on flexible terms, but charge exorbitant rate of interest."
He also opined that the Microfinance Bill, in its present form, has too many loopholes. "These institutions cannot provide a definite answer to the challenges of poverty alleviation, but they can lead to financial inclusion by providing credit to the customer as per his needs," he said.
The ministry has opened `Aajeevika Cell' at Nabard which will work in a close coordination with the ministry to achieve the goals of National Rural Livelihood Mission. The Cell will aim at providing the poor women a better access to financial resources. Initially, the cell will focus ons about 600 backward and Naxal-infested blocks, in 150 districts.