Self-Help Groups
SHG: voluntary association of poor, 10-20 members (register if >20), homogeneous, mutual affinity. Savings → internal lending → bank linkage. 3 models (NABARD-Bank-SHG). Savings:loan ratio 1:1 to 1:4 (matured=beyond). No collateral. PSL (weaker sections). NABARD 100% refinance. JLG: 4-10 members.
Banky Links SHGs to Banks! 🤝
SHGs are the silent revolution of Indian microfinance. Small groups of poor people save together, lend to each other, and then access bank credit. The SHG-Bank Linkage Programme has transformed millions of lives!
Why Read This Chapter?
SHG = poor people helping each other — banks amplify their efforts through linkage
Exam Marks
2-3 questions — visitors book NOT compulsory (exam PYQ!), savings:loan ratio 1:1 to 1:4, Model II most popular, no collateral for SHG, NABARD 100% refinance, JLG 4-10 members. Important!
Career Growth
SHG lending is a major portfolio in rural branches — understanding SHG operations = branch success
Real Life
SHGs empower the poorest sections — understanding them helps you contribute to financial inclusion
How Will It Benefit You?
Real career advantages
What Is This Chapter About?
30-second summary
Key Definitions — Banky Asks, Mentor Explains
Every term explained like you’re 10
Banky’s Understanding: SHG: Voluntary association of poor formed with common goal of social and economic empowerment. 10-20 members (registration compulsory if >20). Homogeneous class (same socio-economic background). Mutual affinity. Activities: Regular savings → pooled corpus → internal lending → learn financial discipline → bank linkage. Records required: Minutes book, attendance register, loan ledger, general ledger, cash book, bank passbook, members passbooks. Visitors book: NOT compulsory (exam PYQ!). Group bank account preferably in service area bank. Corpus used to advance loans to members at interest.
Banky’s Understanding: SHG-Bank Linkage: (a) Savings A/c: SHGs (registered or unregistered) eligible for SB account. CDD of all members at credit linking (not savings). (b) Lending: Savings linked loans — ratio 1:1 to 1:4. Matured SHGs: beyond 4x at bank discretion. Loan in SHG name — SHG decides member purposes. (c) No collateral (RBI/NABARD guidelines). (d) Priority sector: weaker sections. (e) NABARD: 100% refinance. (f) No service charges ≤₹25K per member. (g) Defaulter members in SHG should not prevent SHG financing (if SHG itself not in default). 3 Models: Model I: NABARD→Bank→SHG (direct, no NGO). Model II: NABARD→Bank→SHG with NGO facilitating (most popular!). Model III: NABARD→Bank→NGO→SHG (NGO as financial intermediary).
Banky’s Understanding: JLG: Joint Liability Group. 4-10 members of same village/locality. Homogeneous. Mutual guarantee (joint liability). For: small/marginal farmers, tenant farmers, oral lessees, share croppers, micro-entrepreneurs not covered by SHGs. Members may also be SHG members (continue SHG activities). Can form from one or more SHGs. Banks assess using own techniques or NABARD model. NABARD: 100% refinance for JLG loans too. No collateral. Priority sector.
Chapter Explained in Simple Stories
So easy even Banky’s nephew understands
🤝 Block 1: SHG Definition, Formation & Records
SHG: Voluntary, 10-20 members, homogeneous, mutual affinity. Save → internal lend → bank link.
Records: Minutes, attendance, loan ledger, cash book, passbooks. Visitors book NOT compulsory (exam PYQ!).
Group bank account in service area bank. Corpus for member loans.
Registration compulsory only if >20 members.
🏦 Block 2: Bank Linkage, Models & JLG
Savings:loan ratio: 1:1 to 1:4 (matured = beyond 4x). No collateral. PSL (weaker sections).
NABARD: 100% refinance. No service charges ≤₹25K/member. CIC reporting.
3 Models: I = Bank-SHG (direct). II = Bank-SHG + NGO (most popular). III = Bank-NGO-SHG.
JLG: 4-10 members. Mutual guarantee. For SF/MF/tenants/micro-entrepreneurs. NABARD refinance.
Defaulter member in SHG should NOT prevent SHG financing (if SHG not in default).
Exam Angle — Every Testable Point
All facts, numbers, definitions JAIIB tests
✅ Must-Know Facts — Highest Probability
- Visitors book NOT compulsory for SHG — exam PYQ! (minutes/loan register/passbook ARE)
- Savings:loan ratio 1:1 to 1:4 (matured SHGs beyond 4x)
- No collateral for SHG loans (RBI/NABARD guidelines)
- NABARD provides 100% refinance for SHG and JLG loans
- Model II (NGO facilitates) is the most popular SHG-Bank Linkage model
- SHG = 10-20 members | Registration compulsory if >20
- JLG = 4-10 members | Mutual guarantee | Same village/locality
- Defaulter member should NOT prevent SHG financing (if SHG not in default)
- No service charges on priority sector loans ≤₹25K per member (not per SHG)
- SHG loans = priority sector (weaker sections)
- CDD of all members at credit linking (not savings account opening)
- SHG decides loan purposes for members — bank does not decide
- Loan in name of SHG — SHG responsible for repayment
- JLG for SF/MF/tenant farmers/micro-entrepreneurs not covered by SHGs
📝 Previous Year Questions
Memory Tricks That STICK
Lock every fact permanently
🧠 Trick 1 — Visitors Book ≠ Compulsory
🧠 Trick 2 — Savings:Loan 1:4
🧠 Trick 3 — 3 Models (II Most Popular)
🧠 Trick 4 — JLG = 4-10
Visual Summary — Chapter Map
Entire chapter in one diagram
Flash Revision — Last-Minute Cards
Read these 10 minutes before exam
⚡ Chapter 41 Complete — Self-Help Groups
- SHG: 10-20 members, voluntary, homogeneous | Save → internal lend → bank link | Visitors book NOT compulsory
- Bank linkage: savings:loan 1:1 to 1:4 (matured beyond) | No collateral | PSL weaker sections | NABARD 100%
- 3 Models: I (direct), II (NGO facilitates — most popular!), III (NGO intermediary)
- JLG: 4-10 members, mutual guarantee | For farmers/MSEs not in SHGs | NABARD refinance
Banky says: “SHG 10-20, visitors book≠compulsory, savings:loan 1:4, Model II popular, JLG 4-10!” 🎉🤝
You now understand SHGs — the grassroots revolution of Indian microfinance. Module B is COMPLETE! 🏆💪