Banking on SHGs - Nabard

42 <strong>Banking</strong> on Self-Help GroupsIndia. Also, in most states, the state governments have not been as proactivein promoting bank linkage as in Andhra Pradesh and some of the southernstates. As a result the majority of SHGs linked are those under the SGSYprogramme—the government programme aimed at asset creation throughindividual and group enterprises and implemented through SHGs in whichthere is a subsidy and a bank loan component. Unless state governmentshave well-established and dedicated structures like those of SERP, BiharRural Livelihoods Promotion Society (BRLPS) and TRIPTI, it would appearthat SHG–bank linkage does not happen automatically. The situation hasclearly been aggravated by the microfinance crisis of 2010, which startedwith Andhra Pradesh but also spread to other states, especially TamilNadu and Karnataka. While bankers generally refrained from admittingto a major decline in SHG lending, the freshly released NABARD data for2010–11 clearly testify to the adverse impact of the crisis not only on lendingto MFIs but also on lending to SHGs by the banks. 6 As a result, the numberof bank loans disbursed to SHGs during 2010–11 increased by merely 0.7%over the previous year as against annual increases of nearly 60% during2001–05 and 26% during 2006–10 (Table 3.3b). Average loan disbursedper SHG nevertheless continued to increase substantially by 20% in2009–10 to ` 91,712 and again, by as high as 34% to ` 121,637 in 2010–11. 7 One inference from this pattern is that banks have concentrated ondeepening their portfolio through repeat loans to existing SHGs ratherthan extend loans to newly eligible SHGs. This is further supported by thewidening gap in recent years (particularly large during 2010–11) betweenthe number of SHGs with savings accounts with banks and the number ofSHGs with outstanding loans (Table 3.2).As far as loans outstanding to SHGs are concerned, the data from 2007–08 to 2009–10 show an annual increase of nearly 14%. However, during2010–11 with the steep fall in the disbursement of new loans the numberof SHGs with outstanding loans has also declined in absolute terms from4.85 million to 4.79 million, registering a fall of nearly 1% during 2010–11.6Arunachalam (2011) draws attention to the continued unwillingness of banks to lend to SHGs(especially in Andhra Pradesh and Tamil Nadu) following the Andhra Pradesh crisis of2010 because of the fear that these fresh loans may be used to repay overdue loans toMFIs since SHG members are also members of JLGs formed by the MFIs. However,it appears that repayments to MFIs by their clients have completely stopped and it isunlikely that there will be repayments to MFIs in the near future as well.7There is a kind of inverse relationship between number of loans disbursed and the loanamount. The two years of reduced number of loans disbursed (2009–10 and 2010–11)are associated with significantly larger average loan sizes. The cutback would thus appearto be in the (smaller ticket size) loan component of relatively new SHGs. At the same timeduring 2006–07, when the number of loans disbursed increased by 78% over the previousyear, the average loan size declined by 18%.