The Hindu Business Line : AP to rationalise SHGs' interest rate subsidy

THE Andhra Pradesh Government will put in place a system from July 1, which would ensure that self-help groups (SHGs) would have to pay only 3 per cent per annum as interest to banks.

Currently, the Government is providing interest subsidy to the SHGs to bridge the gap on loans provided by banks, which vary between 9-11 per cent per annum.

Under the interest subsidy scheme called "Pavala Vaddi", launched on July 1, 2004, the Government has to reimburse up to Rs 27 crore towards interest subsidy.

Currently, around 8,18,000 rural poor women have organised themselves into 74,000 SHGs. By the end of 2005-06, the Ministry of Panchayati Raj and Rural Development is optimistic of adding another 70,000 SHGs, according to the Minister, Mr D. Srinivas.

The rationalisation of the interest subsidy will mean that the Government has to cough up Rs 60 crore atleast during fiscal 2005-06 as reimbursements. The Rural Development Minister held detailed discussions with banks, which have been providing liberal loans to the SHGs to work out the mechanism.

Releasing the annual performance of his Ministry, Mr Srinivas told newspersons on Sunday that during the current fiscal about Rs 2,200 crore would be secured as bank loans for the SHGs.

During the last fiscal, 3,861 bank branches (84 per cent of all bank branches) participated in the SHG-bank linkage programme, which he said was the highest among all States.

Similarly, a total of 2.89 lakh groups were assisted with Rs 1,240 crore bank credit.

Referring to marketing activities of the Ministry, Mr Srinivas said the turnover from 57 commodities was Rs 16 crore, which benefited 64,631 families. During 2005-06, an ambitious target of Rs 60 crore turnover to benefit two lakh families has been set.

To achieve this, the Ministry has decided to set up 300 market committees and create minimum infrastructure facilities in about 400 mandal headquarters. The idea is to increase marketing facilities. Each mandal will be given Rs 10 lakh for creating facilities such as godowns and drying platforms, he said.

Giving an example of the growing market prospects, Mr Srinivas said corporates such as EID Parry and ITC had started buying neem seeds directly from village samakhya's in Warangal.

This had boosted neem production and given high returns to the poor people.

Encouraged by this, he had asked Department officials to invite more corporates to discuss ways of improving marketing tie-ups.

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