RBI asks banks to extend loans to women SHGs at 7%

The Reserve Bank of India (RBI) today directed public sector banks (PSBs) to provide loans to women self help groups (SHGs) at 7 per cent interest per annum under the government's Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme, extending them the benefit of interest rate subvention scheme.

''PSBs will be subvented to the extent of difference between the weighted average interest charged and 7 per cent subject to the maximum limit of 5.5 per cent, for the FY-2014.

''This subvention will be available to all the PSBs on the condition that they make SHG credit available at 7 per cent in the 150 districts,'' the RBI said in a notification.

Likewise, the regional rural banks (RRBs) will be subvented to the extent of difference between the lending rates and 7 per cent for FY-2014 on the condition they make SHG credit available at 7 per cent, it added.

These SHGs will be given an additional 3 per cent subvention on prompt repayment of loan, under the scheme.

For all loans up to Rs3 lakh, sanctioned to women SHGs on or after 1 December 2013, banks must charge an interest rate of 7 per cent.

However, for all loans extended to women SHGs between 1 April and 30 November 2013, banks should charge only 7 per cent interest effective 1 April 2013.

RBI has asked banks to submit their claims on a half-yearly basis as on 30 September 2013 and 31 March 2014.

The SGSY scheme, launched by the ministry of rural development under its National Rural Livelihood Mission on 1 April 2013, aims at reducing poverty by empowering the poor, especially women, to build strong institutions.

It aims to enable these institutions to access a range of financial services and livelihoods services.