Frequently Asked Questions (FAQs) in SHG Bank Linkage

Opening of Bank Accounts by SHGs

Can a SHG open Saving Bank Account in nearest branch of the bank which is not in the service area?

Yes, SHG can open saving account with any bank.

Reference may be made to RBI master circular on Micro Credit No RBI/2010-11/407, RPCD. FID. BC.No. 53 / 12.01.001/ 2010-11 date 14 Feb., 2011 and master circular on SHG bank Linkage No RBI/2018-19/07, FIDD.FID.BC.No.04/12.01.033/2018-19 dated July 2, 2018.

Is it necessary for the SHG to be registered for opening of the Saving Bank Account?

Registration of SHG is not necessary for opening of the saving bank account. SHG may or may not be registered.

Reference may be made to RBI master circular on Micro Credit No RBI/2010-11/407, RPCD. FID. BC.No. 53 / 12.01.001/ 2010-11 date 14 Feb., 2011 and master circular on SHG bank Linkage No RBI/2018-19/07, FIDD.FID.BC.No.04/12.01.033/2018-19 dated July 2, 2018 page 2- 3 item No 4.

What are documents required for opening of the saving bank account with the Bank.

Following documents are required for opening of the saving bank account:

• Account opening Form
• Resolution of the SHG for opening of saving bank account with the Bank and authority to office bearers to open and operate the account. Operation of the account may be either by any two office bearers or otherwise as deemed fit by the members.
• Two/three Passport size coloured photographs of Office bearers.
• Seal of the SHG.

KYC documents of the office bearers for identification and address proof.

RBI master circular on SHG bank Linkage No RBI/2018-19/07, FIDD.FID.BC.No.04/12.01.033/2018-19 dated July 2, 2018 page 2- 3 item No 4.

Passport/driving licence/Aadhaar card/voter Identity Card/Job card/any other document acceptable to the Bank. If e-KYC of office bearers is done by the Bank, no other documentary proof other than Aadhaar card is required.

What type of saving bank account should be opened by the SHG with the Bank?

The account can be Basic Saving Bank Deposit Account or normal Saving Bank Account. However, it is better if normal saving bank account is opened to avoid confusion at a later stage as there are certain restrictions on deposits, withdrawals and balance limit in Basic Saving Bank Deposit Account.

Whether PAN No is required for opening of the saving bank account of the SHG with the Bank?

PAN No is not necessary for opening bank account of the SHG instead FORM 60 have to be furnished.

As per Central Board of Direct Taxes Notification dated 6th January, 2017, the details of the SHG members have to be furnished in column 18 of the FORM 60. RBI circular on DAY- NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 4 item No. 7.1.1 also confirms that PAN of SHG should not be insisted upon at the time of opening of account or transactions. Banks may accept declaration in Form No 60 as may be required.

Do KYC of all members is required to open saving account of SHGs?

No. KYC verification of all the members of SHG shall not be required while opening the Savings bank account of the SHG as KYC verification of all the office bearers shall suffice.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 4 item No. 7.1.1.

Whether presence of all SHG members is required in the Bank branch at the time of opening Saving Bank account of the SHG?

No, presence of all the SHG members is not required at the time of opening of the account of the SHG. Only office bearers’ presence is sufficient for KYC requirement.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 4 item No. 7.1.1.

When the saving account should be opened with the Bank.

Saving account of the SHG should be opened with the Bank within two month of the formation of the SHG.

Which date should be considered for the formation of the SHG?

The date of resolution on formation of SHG should be considered as the first date for all purposes (As noted in the minutes Register).

Does authorization letter required from Govt/Gram Panchayat to open savings account of SHGs?

No, authorisatioon letter from GP/BDO/Any other Govt. Department is not required to open the saving bank account of the SHG.

Bank Loan for SHGs

If no dues/no objection certificate is required for obtaining Bank loan?

SHGs are not required to obtain No dues/no objection certificate for Bank loan.

Please refer RBI circular No RBI/2018-19/5, FIDD.CO.LBS.BCNo2/02.01.001/20-18-19 dated July 2, 2018 item 8.1.

What are the eligibility criteria for the SHG to avail Bank loan?

The following conditions should be fulfilled for availing bank loan:-

• The SHG should be in active existence at least since the last for 6 months as per the Books of account of SHG and not from the date of opening of SB account.
• SHG should be practicing Panchasutras i.e. Regular Meetings, Regular savings, regular inter-loaning, Timely repayment and up-to date books of accounts.
• Qualified as per the Grading norms fixed by NABARD.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 5 item No. 7.2.1.

If KYC of all members of SHG is required at the time of availing loan from the Bank?

KYC verification of all the members in the SHG can be made by the banks at the time of credit linking of SHGs.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 4 item No. 7.1.1.

Whether opening of accounts of all members of SHG is required at the time of credit Linkage?

Opening of saving accounts of all the members of the SHG shall not be made a prerequisite for credit linkage of SHGs by the banks.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 4 item No. 7.1.1.

If the existing defunct SHGs are also eligible for Bank loan?

The existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of three months.

RBI master circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 5 item No. 7.2.1.

What is the margin and collateral security required for Bank loan?

No margin or collateral is required up to Rs. 10.00 lakh limits to the SHGs.

RBI circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 8 item No. 7.4.

Whether Bank can mark lien or block saving Bank account of the SHG while making finance to the SHGs?

Bank cannot mark lien against Saving Bank account of the SHG and no deposits can be insisted upon while sanctioning loan.

RBI Circular on DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018- 19 dated July 3, 2018 page No 8 item No. 7.4.

Can branch deduct/debit amount (either from loan or saving) of the SHG if spouse of members are defaulter of earlier schemes?

Branch cannot debit SHG account either savings or loan if the spouse of any member is defaulter of earlier schemes.

What are the processing charges and service charges of the Banks for SHG loans?

No loan related charges/ad hoc services charges/inspection charges should be levied for loan up to Rs. 25,000 per member for the loans to the SHG.

RBI master circular on SHG bank Linkage No RBI/2018-19/07, FIDD.FID.BC.No.04/12.01.033/2018-19 dated July 2, 2018 page 4 item No 7.

What constitutes the Corpus of the SHG?

As shown in the books of the SHG, Corpus of the SHG includes:-

• Savings of the members
• Interest earnings by SHG from on lending to its members
• Revolving Fund
• Income from other sources
• Funds from other sources including donations

RBI master circular on SHG bank Linkage No DAY _ NRLM No RBI/2018-19/9, FIDD.GSSD.CO.BC.No.05/09.01.01/2018-19 dated July 3, 2018 page No 7 item No 7.2.3 (Last para).

Can earlier loan defaulters be members of the SHGs?

Members who have availed loans earlier from the financial system and could not repay their dues can be admitted as a members of the SHG but they cannot avail any loan from SHG out of the Bank Finance.

Can such SHGs having defaulters as members avail loan from the Banks?

Willful defaulters of the group should not get benefits under DAY-NRLM Scheme and group may be financed excluding such defaulters. The bank will finance on the basis of the loan requirement of other SHG members who are not willful defaulters.

RBI master circular on DAY-NRLM No RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page 8 item No 7.5.1

Can bank deny loan to the SHG if spouse or any other member of the family is defaulters of the Bank.

Banks should not deny loan to entire SHG on the pretext that spouse or other family members of individual members of SHG being a defaulter with the Bank. Non willful defaulters should not be debarred from receiving the loan.

RBI master circular on DAY-NRLM No RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page 8 item No 7.5.1

Will SHG be able to raise only one type of loan i.e. either Term Loan or CCL?

SHGs can avail Term Loan or CCL or both as per their requirement. In case of need, additional loan can be sanctioned even though the previous loan is outstanding.

RBI master circular on DAY-NRLM No RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page6 item No 7.2.3.

Is it essential for the SHG to deposit entire saving in the bank to avail Bank Loan?

No Bank cannot insist on depositing Savings of the members in the Bank or take Savings as Collateral.

Is it mandatory for the SHG to avail loan from the bank for the productive purposes only?

The loans may be used by the members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihood activities by the individual members within the SHG or to finance any viable common activity started by the SHGs.

In order to facilitate use of loans for augmenting livelihoods of SHG members, it is required that at least 50% of loans above Rs. 2 lakhs and 75% of the loans above Rs. 4 lakhs be used primarily for income generating productive purposes. MCP prepared by SHGs would form the basis of determining the purpose and usage of loans.

RBI circular no DAY-NRLM RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page 7 item No 7.3.1

What is the amount of stamp duty to be charged by the banks for loans to SHGs?

Stamp duty is under State jurisdiction and can be clarified by the State with the help of the SLBC. In most of the states, stamp duty on loan documents for the SHGs has been waived. States can take the matter at the appropriate level for exemption of stamp duty.

Is there any penal interest charges by the bank on SHG loan accounts?

There is no penal interest for loan up to Rs. 25000/- per member as loans to SHGs are considered as Loans to Weaker Section under Priority Sector.

Can loan Pass Book be issued to the SHGs by the Banks?

Loan Pass Books in the Regional Languages may be issued to the SHG which may contain all the details of the loan disbursed and terms and conditions applicable to the loan sanctioned.

RBI master circular on DAY-NRLM No RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page 9 item No 9.1

Can a Bank sanction more than Rs. One lakh loan to the SHG in the First Year/First Dose?

Drawing Power for the first year in case of Cash Credit Limit is 6 times of the existing corpus or minimum Rs. One lakh whichever is higher and in case of Term Loan the first dose is 6 times of the existing corpus or minimum Rs. One lakh whichever is higher. Thus the loan amount for the first year or fist dose may be more than Rs. One lakh.

RBI master circular on DAY-NRLM RBI/2018-19/19, FIDD.GSDD.BC.No.05/09.01.01/2017-18 dated July 3, 2018 page 6 item No 7.2.3

Source : National Rural Livelihoods Mission