Self-help groups’ data to be digitized

New Delhi: The National Bank for Agriculture and Rural Development (Nabard) is starting an ambitious drive to digitize records of 7.3 million self-help groups (SHGs), besides collecting their members’ Aadhaar details. The move is aimed at helping banks access records of SHGs in real time to reduce lending risks.

Once the digitization is complete, banks can access information on credit history, records of their members and their meetings, and also weed out defaulters and those who are part of multiple groups.

An SHG is a village-level body consisting of 12-15 individuals where members pool their savings for lending. They also take bank loans. Generally, banks are in contact with only one SHG member, who coordinates.

Nabard will initially launch a pilot in two districts—Ramgarh in Jharkhand and Dhuli in Maharashtra—before expanding it to other districts.

“A bank manager will be able to track the activities of the SHGs sitting in a room. How much savings does an SHG have, how regularly they meet and the profile of the members. This will provide comfort to the banker and change the risk perception of SHGs,” said Harsh Kumar Bhanwala, chairman, Nabard. “Banks will also be able to rate groups and increase lending.”

Around 4.4 million SHGs in India have access to bank funding, according to government estimates. Bank loans outstanding to the SHGs was at ₹ 42,927 crore as of end March 2014.

Nabard will also seek details of SHG members with Aadhaar to weed out members who join multiple groups to take multiple loans. Those who do not have Aadhaar details will be put in touch with enrolment agencies to get the unique identity number. “While more bank accounts are being opened under Jan Dhan, the challenge will be to address dormancy. Since SHGs are key for generating savings and livelihoods, digitizing SHGs will help in improving synergies as Jan Dhan accounts are now online,” he said. Pradhan Mantri Jan Dhan Yojana is an ambitious plan for financial inclusion in India.

“Though RBI has placed limits on the amount of loan that an individual borrower can take from micro-finance institutions, there is no such limit for SHGs. SHGs’ non-performing assets are in double digits in some regions. This is because the banks do not know the credit or debt profile of the SHGs,” said Vibha Batra, senior vice-president at rating agency Icra Ltd.

As of 31 March 2014, NPAs against loans to SHGs was at 6.83%, marginally lower than the 7.085% a year ago. However, the reduction was on account of an improvement in NPAs in the southern region. NPAs were at almost 19% in the central region, with other regions except south ranging between 9-14%.