As of October, the outstanding amount stood at Rs 2,098 crore, or 16.42% of the total.
Banks, which of late are seeing lower repayments from microfinance institutions, are facing a similar problem again. This time, it’s from the government-nurtured self-help groups (SHGs).
The government has admitted that recoveries from SHGs in recent times had fallen to 70 per cent. In the last ten years, loans worth Rs 29,000 from banks were arranged to SHGs, which had a near 100 per cent repayment history. There are over one million SHGs involving nearly 10 million households in rural and urban areas of the state
According to banking officials, the overdues under SHG lending are mounting. As of October, the amount stood at Rs 2,098 crore, 16.42 per cent of the total loan outstanding of Rs 12,777 crore.
The State Level Bankers’ Committee (SLBC) recently said they could extend loans to the rural sector only if there was a continuous thrust on prompt repayment. It urged the government to assist them in recovery, especially loans given under the SHG-bank linkage and weaker section housing (Indiramma) programmes.
With banks putting the onus to increase the recovery from SHGs on the government, the Society for Elimination of Rural Poverty, the nodal agency for the SHGs, issued an advisory on December 24 asking them to repay on time.
“Our groups repay the loans on their own. But if bank officials come for recovery, it implies that the group is not functioning properly,” the advisory said. Some groups have taken loans worth Rs 500,000 from banks, which have issued guidelines to increase the amount up to Rs 10 lakh for repeat loan cycles after repayment of the earlier loans.
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The delay or non-payment of dues happened because groups did not take loans based on their repayment capacity, the advisory said. Here, MFIs have been criticised for resorting to overlending, which burdened the borrowers and as a result affected their repayment to banks.
Suggesting a community-based recovery mechanism, the advisory said SHGs could get the loans below Rs 1 lakh rescheduled to 36 months and those above to 60 months to enable them to repay.
“The SHG loans and those given for Indiramma houses will not be waived. If the repayment is delayed, the interest burden will increase. Banks will initiate measures to recover the loans,” the advisory said, adding only groups that were prompt in repayment would be eligible for the government’s Pavala Vadi scheme — loans at 25 paise interest (3 per cent per annum).
The advisory asked the groups to take fresh bank loans only for livelihood enhancement and use the group savings for meeting household expenses.
“The recoveries of overdues are indeed a major concern for the banks,” said Andhra Bank chairman and managing director and SLBC president R Ramachandran. Andhra Bank is the lead bank in the state.