The Hindu : Andhra Pradesh News : Only 2.12 lakh SHGs eligible for loans

Online edition of India's National Newspaper
Wednesday, May 04, 2005

Andhra Pradesh

Andhra Pradesh

Only 2.12 lakh SHGs eligible for loans

Ravi Reddy

YSR keeps major election promise YSR keeps major election promise of extending soft loans to thrift groups at 3 p.c. interest

HYDERABAD: Less than half of the 5.79 lakh self-help groups (SHGs) functioning in the State are eligible for the much-publicised 3 per cent interest rate promised by the Congress during the last Assembly elections.

To be precise, only 2.12 lakh SHGs are eligible for this huge interest subsidy since the new guidelines stipulate that only those groups which have received loans after July 1, 2004, will receive the incentive.

A Government Order laying down the eligibility guidelines was issued by the Department of Panchayat Raj and Rural Development on Monday. Banks are presently charging interest rates varying between 8 and 12 per cent from self-help groups like DWCRA.

Huge incentive

It may be recalled that the Chief Minister, Y. S. Rajasekhara Reddy, had promised during the high voltage election campaign last year, that the Congress would extend loans to thrift groups at 3 per cent interest.

A conservative estimate puts the loans disbursed by banks to SHGs at Rs. 1,200 crores so far. The incentive by way of interest subsidy to SHGs works out to Rs. 30 crores, a figure which will go up every year.

The order does away with the previous practice when the Government allowed payment of incentive to groups subject to maximum interest ceiling of 6 per cent. Under the revised guidelines, the scheme has been made flexible where in the entire interest burden above 3 per cent will be absorbed by the Government.

The self-help groups were asked to adhere to the repayment schedule strictly but were given a grace period of three months to clear the outstanding dues. The order barred the loan accounts classified as non-performing assets from the incentive. Only certified bank statement would make the groups eligible for the incentive.

Official sources told The Hindu that a large number of self-help groups would benefit from the incentive. "The SHG-bank linkage recovery rate has been very high at 95 per cent and we do not see any difficulty in the groups availing the benefit," a senior official said.

Initially, 2.12 lakh groups, which secured loans after July 1, 2004, would get the incentive. "But this does not bar other groups from getting the incentive.

Once they repay their outstanding loan, they are eligible for fresh loans and the interest incentives also," he added.

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