Hyderabad: The Chief Minister, Mr N. Kiran Kumar Reddy, has opined that Women’s Co-operative Finance Corporation could also work as a nodal agency for mid-way financing for the women self-help groups and the State government would provide working capital for this.
Talking to the Chief Executives of the Banks during the SLBC meeting held here on Thursday, the Chief Minister assured the Bankers that the State government will stand by them and extend full support and cooperation in ensuring recovery of the loans extended to the Women SHGs. He said that though the banks have honored their commitment under the SHG Bank linkage program by lending Rs 7,082 crores against the targeted Rs 7,053 crores, there was still a vast scope to improve the coverage. In this regard, he reminded the Banks of the poor performance in SHG bank linkage in Adilabad district (60%) during 2010-11 which needs to be rectified during 2011-12.
The Chief Minister complimented the bankers, the Zilla Samakhyas and the IKP staff of the remaining districts for achieving their targets. The Chief Minister wanted the bankers and the IKP staff to gear up for achieving the SHG bank linkage target of Rs 9,082 crores during 2011-12 and the Banks should strive to increase the average loan size to a group from the present Rs 1.8 lakh to Rs 2.5 lakh. Mr Reddy expected a more pro-active role by the banks in helping the women’s SHGs in the light of the marginalised role of the micro finance institutions (MFIs) in the State. He was sure that the banks as well as the SLBC would give a serious thought to this aspect.
The Chief Minister said that the State was in the forefront in implementation of SHG bank linkage programme and has been deploying substantial credit to this segment over the years. He said that in the State, Banks have financed 16.90 lakh SHGs with an outstanding amount of Rs 13,153 crores as on March 31 this year that covered over 1.20 crores of Rural and Urban Women population. The SERP has proposed a target of Rs 1,000 crores towards bulk finance for over 500 Mahila Mandal Samakhyas which are functioning well.
The Chief Minister said the Reserve Bank of India vide its circular dated May 3, 2011 said that it was decided to regulate micro finance sector as a separate category. The RBI said that bank credit to Micro Finance Institutions extended on or after April 1, 2011 for on-lending to individuals and also to members of SHGs/JLGs will be eligible for categorisation as priority sector advance under respective categories viz. agriculture, micro and small enterprise, and micro credit (for other purposes), as indirect finance, provided not less than 85% of total assets of MFI are in the nature of “qualifying assets”.
The banks have to ensure that MFIs comply with the following caps on margin and interest rate as also other ‘pricing guidelines’ to be eligible to classify these loans as priority sector loans; margin cap at 12% for all MFIs. The interest cost is to be calculated on average fortnightly balances of outstanding borrowings and interest income is to be calculated on average fortnightly balances of outstanding loan portfolio of qualifying assets; interest cap on individual loans at 26% per annum for all MFIs to be calculated on a reducing balance basis; only three components are to be included in pricing of loans viz., a processing fee not exceeding 1% of the gross loan amount, the interest charge and the insurance premium; the processing free is not to be included in the margin cap or the interest cap of 26%; only the actual cost of insurance i.e. actual cost of group insurance for life, health and livestock for borrower and spouse can be recovered, administrative charges to be recovered as per IRDA guidelines; there should not be any penalty for delayed payment and no Security Deposit/ Margin are to be taken. Bank loans to MFIs, which do not comply with these conditions and bank loans to other NBFCs, will not be reckoned as priority sector loans.
It was said that RBI was in the process of framing regulatory guidelines on the other recommendations of the Malegam Committee. Micro Finance Institutions to he included in the above regulatory framework have to initiate requisite organizational capacity building exercise so as to enable them to conform to the guidelines. Banks which are lending to MFIs will be one of the important pillars of the new regulatory framework and, hence, they need to build up necessary criterion on due diligence while processing loan applications from MFIs. This process should be initiated immediately to ensure that MFIs availing finance from them are capable enough to put up the systems in terms of corporate governance.
Meanwhile, suggestions made by NIRD state that given the initiatives already taken by SHGs, MFIs and Banks, the existing credit assistance to the poor has improved considerably. NIRD feels that the total financial assistance given to the poor cannot be serviced by the prevailing structure. Instead, some strategic intervention like Public-Private Partnership is needed to make noticeable changes throughout the country. There is a greater need to take a fresh look into the credit requirement of the people living in rural areas to meet their consumption and personal needs though based upon the household income criteria. It was also felt that all banks should make consistent efforts to develop the micro and rural credit sector by expanding their outreach and increasing coverage through credit for the larger benefit of the poor households. All the Banks also should ensure that qualitative aspects of lending under Government sponsored schemes are addresses apart from achieving financial targets. (NSS)