Low interest loans will be provided to over 25 lakh women self-help groups (SHGs) across the country under a central programme launched to wipe out absolute poverty from the villages through women empowerment.

Pursuant to the announcement made by the Finance Minister P Chidambaram, in the 2012-13 Budget, the Union Cabinet, which met last week, has approved the provision of interest subvention to women SHGs, operating under National Rural Livelihood Mission (NRLM), enabling them to avail loans up to Rs 3 lakh at an interest rate of 7 per cent a year.

Giving out the details on Monday, Rural Development Minister Jairam Ramesh said the initiative, in the first phase, would focus on 150 backward districts, including the 82 Integrated Action Plan districts, affected by the Naxal menace.

“Today they are getting loans at 11.5 to 14 per cent rate of interest. In 150 districts, all women SHGs which are now getting bank loans at 11.5 to 14 per cent rate of interest will now get it at 7 per cent rate of interest,” he said.

The women SHGs that repay loans in time will get additional 3 per cent subvention, reducing the effective rate to 4 per cent, the Minister said.

In the 150 districts, the Union Government will bear the entire cost of the interest subvention from the market rate to 7 per cent.

In 392 districts, a majority in North India, women SHGs will get loans at 7 per cent rate of interest.

“The Rural Development Ministry will bear its 75 per cent cost and States will bear 25 per cent. The cost involved is Rs 560 crore,” he said.

Dealing with 81 districts in four South Indian States — Andhra Pradesh, Tamil Nadu, Karnataka and Kerala — separately, Ramesh said, “here also, Union Government will bear 75 per cent cost and State Governments will bear 25 per cent.”