Reserve Bank of India consolidates bank guidance for the SHG-Bank Linkage Programme

The Reserve Bank of India issued a Master Circular to all scheduled commercial banks consolidating its instructions on the Self Help Group Bank Linkage Programme up to March 31, 2025, covering SHG savings account opening, SHG credit delivery and associated monitoring and reporting expectations. The circular reiterates that registered and unregistered SHGs promoting savings can open savings bank accounts, with simplified customer due diligence applied as set out in the Master Direction on Know Your Customer. Banks are to embed SHG lending within branch, block, district, state and corporate credit plans, follow a simplified and low-documentation approach with adequate delegation to branch managers, and may sanction savings-linked loans broadly within a 1:1 to 1:4 savings-to-loan range, with scope for higher multiples for matured SHGs at bank discretion. Interest rates remain at bank discretion subject to the Master Direction on interest rates on advances, while service charges and priority sector lending treatment should align with the Master Directions on Priority Sector Lending – Targets and Classification, 2025, including classification under relevant categories such as agriculture, MSME and social infrastructure. The guidance also covers treatment of defaulters (member-level defaults should not ordinarily prevent financing of an SHG that is not in default, but SHG loans should not be used to finance a defaulter member), training and financial literacy expectations, quarterly progress reporting to NABARD within 15 days of the due date, and adherence to the Master Direction on credit information reporting for SHG members.