RBI Directed Public Sector Banks to give loans to women SHGs at 7 percent

RBI on 19 November 2013 directed Public Sector Banks (PSBs) to provide loans to women Self-Help Groups (SHGs) at 7 per cent per annum.

Created On: Nov 20, 2013 15:03 ISTModified On: Dec 30, 2013 17:39 IST

The Reserve Bank of India (RBI) on 19 November 2013 directed Public Sector Banks (PSBs) to provide loans to women self-help groups (SHGs) at 7 per cent per annum to avail the benefit of interest rate subvention scheme under the Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme.

Salient features of RBI Notification

1.All women SHGs will be eligible for interest subvention to avail the credit upto 3 lakh Rupees at 7 per cent per annum.

2.PSBs will be subvented to the extent of difference between the Weighted Average Interest charged and 7 per cent subject to the maximum limit of 5.5 per cent, for the FY-2014.

3.This subvention will be available to all the PSBs on the condition that they make SHG credit available at 7 per cent in the 150 districts.

4.The Regional Rural Banks (RRBs) will be subvented to the extent of difference between the lending rates and 7 per cent for the FY-2014 on the condition they make SHG credit available at 7 per cent.

5.SHGs will be given an additional 3 per cent subvention on prompt repayment of loan.

Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) is an initiative by the government to provide sustainable income to poor people living in rural areas of the country.

About Interest Rate subvention concept

Interest Rate subvention is a subsidy of interest given by Government to certain sectors like Textiles, Agriculture etc. For eg. Textile Company borrows from Bank at 10 percent and Government gives subvention of 2 percent. Hence net bank takes interest from textiles companies 8 percent. Other sectors have to pay 10 percent to the bank.

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