Money & Banking

‘Banks not reporting credit information of individual members of self-help groups’

K Ram Kumar Mumbai | Updated on January 24, 2018 Published on January 14, 2015

BL15_BNK_SHG

Members should get larger loans only if their credit history is captured, says CRIF chief

Individual members of self-help groups (SHG) can become eligible for bigger loans from banks only if the credit history of the intra group borrowings is captured, according to the chief of CRIF High Mark Credit Information Services.

As of now, banks report only credit information pertaining to the groups and not of individual members.

An SHG, as defined by the National Bank of Agriculture and Rural Development, is a voluntary association of 10-20 poor people with mutual affinities — same kind of livelihood, similar community, caste — who have a common goal of social and economic empowerment.

Group members save small amounts of money and lend them to each other. On satisfactory functioning of the SHG, it can get loan from the bank.

Kalpana Pandey, CEO and Managing Director, CRIF High Mark, observed that banks are not keeping track of how the money (loan given by banks to SHGs) is actually distributed between the 10-15 members of SHGs.

“So, what is happening on the ground is that if a person is taking a loan from a microfinance institution (MFI) that (data) is getting captured by the credit bureau. “But if I (as a group member) take a loan from a SHG, my data is not going to the credit information bureau because in this case only the SHG-related data is captured. And bank is only bothered about whether the SHG has actually defaulted or not,” said Pandey.

Since the SHG as a single entity makes loan repayment to the bank, group members actually cover up for individual defaults, if any, as they are collectively responsible for the loan. Credit information bureaus function as a repository of credit information — both current and historical data on existing and potential borrowers. According to the central bank, these institutions maintain data base of credit information — both positive and negative — on the borrower which can be accessed by the lending institution. They are facilitators for credit dispensation and help mitigate the credit risk involved in lending.

Pandey said credit information bureaus, with the help of banks, should track the individual level track records within SHGs so that group members can move to the next level (of economic ladder). Otherwise, they can’t individually go to take a loan from the bank.

“So, if you are talking about financial inclusion, we need to help SHG members build their credit history. For this to happen, the data have to get captured by the credit bureau and that is how you can move that population to the next level,” she said.

Published on January 14, 2015

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.