The Hindu : Andhra Pradesh / Hyderabad News : ‘Allow NBFC to meet credit needs of SHGs'

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Monday, Jun 27, 2011
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Andhra Pradesh

Andhra Pradesh - Hyderabad

‘Allow NBFC to meet credit needs of SHGs'

Special Correspondent

HYDERABAD: Chief Minister N. Kiran Kumar Reddy has urged Union Finance Minister Pranab Mukherjee to permit the setting up of a Non-Banking Financial Company (NBFC) to bridge the credit gap faced by Self Help Groups (SHGs) in the State.

In a letter to Mr. Mukherjee, he said the proposed NBFC would address the credit needs emerging from unforeseen emergencies even as the existing SHG-Bank linkage would continue. The NFBC would provide credit to each mandal samakhya depending on its corpus and functional structure.

He said the NBFC would have an authorised capital of Rs.500 crore and a paid-up capital of Rs.350 crore in the initial year.

He also urged the Government of India to contribute an equity of Rs.100 crore. An equal amount would be provided by the State Government and Rs. 50 crore by Andhra Bank, SBH & NABARD. Apart from this, the mandal samakhyas would also be encouraged to become shareholders in the company.

Pointing out that the State was the role model in organising the rural poor into SHGs, wherein more than one crore rural poor households have been organised into 10 lakh SHGs, he said all the SHGs were linked to banks for their financial needs.

Despite this, they were facing considerable credit gap due to the inability of the banks to address emergency needs and fixing of artificial limits for SHG lending.

As a result, he said many unscrupulous MFIs have been lending at usurious rates and using coercive methods for recovery. He said that a detailed feasibility study by Andhra Pradesh Mahila Abdhivruddi Samakya along with Prof. Sriram ( IIT, Ahmedabad) established the viability of the proposed institution which operates through 1,089 mandal samakhyas by fixing credit limit to each of them.

Mr. Reddy addressed another letter to Union Rural Development Minister Vilasrao Deshmukh seeking concurrence for the proposed NBFC.

He also wrote separate letters to NABARD chairman, Prakash Bakshi, Andhra Bank CMD, R. Ramachandran, and SBH MD, Renu Challu, on the issue and urged them to convey their concurrence for participating in formation of the NBFC.

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