The Hindu Business Line : ‘Banks diluting self-help groups programme’

Coimbatore, April 22 The Chief General Manager of Nabard (Chennai), Mr V.K. Raghavulu, on Tuesday called upon banks to help existing self help groups (SHGs) sustain and progress instead of merely building groups.

Expressing concern about the sustainability of SHGs in Tamil Nadu, he said “banks, in their anxiety to build groups, have been diluting the programme in the last one year or so. They are not concentrating on the purpose for which the SHGs were initially formed,” Mr Raghavulu said.

He was in the city at the launch of ‘Technological Leverage in Micro Finance and Financial Literacy Programme to SHGs’ conducted by HDFC Bank.

After handing over Client Card to SHGs, he said “The SHG advances are not any different from other bank loans. Banks, in their bid to increase the number of groups serviced by each of them failed to look into aspects such as existence of the group for a minimum period of six months, their savings capability and the like. They are financed from the very next day of opening of the account. This could set a bad precedence, for no agency can work without savings.”

He cited the State Cooperative Banks and such other cooperative institutions were gasping for breath because of their failure to mobilise deposits.

Interest subsidy

Nabard, he said, had suggested to the Tamil Nadu Government to go the Andhra Pradesh way by providing interest subsidy to SHGs. “The Government is yet to decide on it,” he said and added that such interest subsidy could be extended from the SHG revolving fund of Rs 150 crore.

Answering a query, Mr Raghavulu said “Banks have extended Rs 1,338 crore finance support to SHGs. Providing interest subsidy from this revolving fund would go a long way in helping these groups. As of now, we are not convinced about their sustainability.”

He emphasised the need for the groups to migrate to micro credit from micro finance after a period of three to four years.

HDFC Bank’s Senior Vice-President (Micro Finance), Mr K. Manohara Raj, said the bank was aiming to bring 10 million rural household within its fold by 2010.

The bank has four micro finance dedicated branches in Tamil Nadu.