Month: April 2021

RBI/2021-22/04
FIDD.CO.LBS.BC.No.02/02.01.001/2021-22

April 01, 2021

The Chairmen/ Managing Directors/ Chief Executive Officers
SLBC/ UTLBC Convenor Banks / Lead Banks

Madam/ Dear Sir,

MASTER CIRCULAR – Lead Bank Scheme

The Reserve Bank of India has issued a number of guidelines/instructions on Lead Bank Scheme from time to time. This Master Circular consolidates the relevant guidelines/ instructions issued by Reserve Bank of India on Lead Bank Scheme up to March 31, 2021 as listed in the Appendix.

2. This Master Circular has been placed on the RBI website https://www.rbi.org.in

Yours faithfully,

(Sonali Sen Gupta)
Chief General Manager-in-Charge

Encl.: As above

Structure

Introduction

(i) The genesis of the Lead Bank Scheme (LBS) can be traced to the Study Group headed by Prof. D. R. Gadgil (Gadgil Study Group) on the Organizational Framework for the Implementation of the Social Objectives, which submitted its report in October 1969. The Study Group drew attention to the fact that commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation. The Study Group, therefore, recommended the adoption of an ‘Area Approach’ to evolve plans and programmes for the development of an adequate banking and credit structure in the rural areas.

(ii) A Committee of Bankers on Branch Expansion Programme of Public Sector Banks appointed by the Reserve Bank of India under the Chairmanship of Shri F. K. F. Nariman (Nariman Committee) endorsed the idea of an ‘Area Approach’ in its report (November 1969), recommending that in order to enable the Public Sector Banks to discharge their social responsibilities, each bank should concentrate on certain districts where it should act as a ‘Lead Bank’.

(iii) Pursuant to the above recommendations, the Lead Bank Scheme was introduced by the Reserve Bank of India in December 1969.The Scheme aims at coordinating the activities of banks and other developmental agencies through various fora in order to achieve the objective of enhancing the flow of bank finance to the priority sector and other sectors and to promote banks’ role in the overall development of the rural sector. For coordinating the activities in the district, a particular bank is assigned ‘Lead Bank’ responsibility of the district. The Lead Bank is expected to assume a leadership role for coordinating the efforts of the credit institutions and the Government.

(iv) In view of the several changes that had taken place in the financial sector, the Lead Bank Scheme was last reviewed by the High Level Committee headed by Smt. Usha Thorat, the then Deputy Governor of the Reserve Bank of India in 2009.

(v) The High Level Committee held wide ranging discussions with various stakeholders viz. State Governments, banks, development institutions, academicians, NGOs, MFIs etc. and noted that the Scheme has been useful in achieving its original objectives of improvement in branch expansion, deposit mobilisation and lending to the priority sector, especially in rural/semi urban areas. There was overwhelming consensus that the Scheme needs to continue. Based on the recommendations of the Committee, the guidelines were issued to SLBC Convenor banks and Lead Banks for implementation.

(vi) Envisaging greater role for private sector banks, Lead Banks were advised to ensure that private sector banks are more closely involved in the implementation of the Lead Bank Scheme. Private sector banks should involve themselves more actively by leveraging on Information Technology bringing in their expertise in strategic planning. They should also involve themselves in the preparation as well as implementation of the District Credit Plan.

(vii) In view of the changes that have taken place in the financial sector over the years, the Reserve Bank of India had constituted a “Committee of Executive Directors” of the Bank to study the efficacy of the Scheme and suggest measures for its improvement. Based on the Committee’s recommendations and feedback received from various stakeholders, certain ‘action points’ were issued to SLBC Convenors/Lead Banks and NABARD on April 6, 2018.

2. Fora under Lead Bank Scheme

2.1 Block Level Bankers’ Committee (BLBC)

Block Level Bankers’ Committee (BLBC) is a forum for achieving coordination between credit institutions and field level development agencies at the block level. The forum prepares and reviews the implementation of the Block Credit Plan and also resolves operational problems in the implementation of the credit programmes of banks. The Lead District Manager (LDM) of the district is the Chairman of the Block Level Bankers’ Committee. All the banks operating in the block including the Small Finance Banks, Wholly Owned Subsidiaries (WOS) of Foreign Banks, RRBs, the District Central Co-operative Banks, Block Development Officer, technical officers in the block, such as extension officers for agriculture, industries and co-operatives are members of the Committee. BLBC meetings are held at quarterly intervals. To strengthen the BLBC forum which operates at the base level of the Lead Bank Scheme, it is necessary that all branch managers attend BLBC meetings and enrich the discussions with their valuable inputs. Controlling Heads of banks may also attend a few of the BLBC meetings selectively. Participation by the District Development Manager (DDM) of NABARD in BLBCs would ensure better and more meaningful discussions for the development of the Block. Therefore, NABARD has been advised that DDMs should attend all Block Level Bankers’ Committee meetings in their district and actively participate in the credit planning exercise and review meetings at the block level. The Lead District Officer (LDO) of the Reserve Bank of India (RBI) selectively attends the BLBC meetings. The representatives of Panchayat Samitis are also invited to attend the meetings at half yearly intervals so as to share their knowledge and experience on rural development in the credit planning exercise. Payments Banks should also be invited to attend the meetings.

2.2 District Consultative Committee (DCC)

2.2.1 Constitution of DCC

The District Consultative Committees were constituted in the early seventies as a common forum at the district level for bankers as well as Government agencies/departments to facilitate coordination in implementing various developmental activities under the Lead Bank Scheme. The District Collector is the Chairman of the DCC meetings. Reserve Bank of India, NABARD, all the commercial banks including Small Finance Banks, Wholly Owned Subsidiaries (WOS) of Foreign Banks, RRBs, Payments Banks, Co-operative banks including the District Central Cooperative Bank (DCCB), various State Government departments and allied agencies are the members of the DCC. The Lead District Officer (LDO) represents the Reserve Bank as a member of the DCC. The Lead District Manager (LDM) convenes the DCC meetings. The Director of Micro, Small and Medium Enterprises Development Institute (MSME-DI) in the district is an invitee in districts where MSME clusters are located to discuss issues concerning MSMEs.

2.2.2 Conduct of DCC Meetings

1. DCC meetings should be convened by the Lead Banks at quarterly intervals.

2. At the DCC level, sub-committees as appropriate, may be set up to work intensively on specific issues and submit reports to the DCC for its consideration.

3. DCC should give adequate feedback to the SLBC on various issues that need to be discussed on a wider platform, so that these receive adequate attention at the State Level.

2.2.3 Agenda for DCC Meetings

While Lead Banks are expected to address the problems particular to the concerned districts, some of the important areas which are common to all districts which the lead banks should invariably discuss in the fora are as under:

1. Review of progress under Financial Inclusion Plan (FIP).

2. The specific issues inhibiting and enabling IT enabled financial inclusion

3. Issues to facilitate ‘enablers’ and remove/minimise ‘impeders’ for banking development for inclusive growth

4. Monitoring initiatives for providing ‘Credit Plus’ activities by banks and State Governments such as setting up of Financial Literacy Centres (FLCs) and RSETI# type Training Institutes for providing skills and capacity building to manage businesses.

5. Scaling up financial literacy efforts to achieve financial inclusion.

6. Review of performance of banks under District Credit Plan (DCP)

7. Flow of credit to priority sector and weaker sections of the society

8. Doubling of Farmers’ Income by 2022

9. Assistance under Government sponsored schemes

10. Grant of educational loans

11. Progress under SHG – bank linkage

12. SME financing & bottlenecks thereof, if any

13. Timely submission of data by banks

14. Review of relief measures (in case of natural calamities wherever applicable)

The above list is illustrative and not exhaustive. The Lead Banks may include any other agenda item considered necessary.

# Rural Self Employment Training Institutes (RSETIs) should be more actively involved and monitored at various fora of LBS particularly at the DCC level. Focus should be on development of skills to enhance the credit absorption capacity in the area and renewing the training programmes towards sustainable micro enterprises. RSETIs should design specific programmes for each district/ block, keeping in view the skill mapping and the potential of the region for necessary skill training and skill up gradation of the rural youth in the district.

2.2.4 Role of LDMs

As the effectiveness of the Lead Bank Scheme depends on the dynamism of the District Collectors and the Lead District Managers (LDMs), with supportive role of the Regional/Zonal Office, the office of LDM should be sufficiently strengthened with appropriate infrastructural support being the focal point for the successful implementation of the Lead Bank Scheme. Apart from the provision of a separate office space, technical infrastructure like computers, printer, data connectivity, etc. which are basic necessities for LDMs to discharge their core responsibilities may be provided to LDMs’ Office without exception. Officers of appropriate level, attitude and possessing requisite leadership skills should be posted as LDMs. Additionally, it is suggested that a dedicated vehicle may be provided to LDMs’ to facilitate closer liaison with the bank officials, district administration officials as also to organise/ attend various financial literacy initiatives and meetings. The absence of a specialist officer/assistant for data entry/analysis is a common and major issue faced by LDMs. Liberty to hire the services of skilled computer operator may be given to the LDMs to overcome the shortage of staff/ in case appropriate staff is not posted at LDM office. Further, for successful functioning of the Lead Bank Scheme, we expect Lead Banks to go the extra mile to provide facilities over and above the bare minimum to these critical field functionaries. Apart from the usual role of LDMs like convening meetings of the DCC/DLRC and periodical meetings of DDM/ LDO/ Government officials for resolving outstanding issues etc., the new functions envisaged for LDMs include the following:

1. Monitoring the implementation of the District Credit Plan

2. Associate with the setting up of Financial Literacy Centres (FLCs), RSETIs by banks

3. Associate with organizing financial literacy camps by FLCs and rural branches of banks.

4. Holding annual sensitisation workshops for banks and Government officials with participation by NGOs/Panchayati Raj Institutions (PRIs)

5. Arranging for quarterly awareness and feedback public meetings, grievance redressal etc.

2.2.5 Quarterly Public Meeting and Grievance Redressal

The Lead District Manager should convene a quarterly public meeting at various locations in the district in coordination with the LDO of Reserve Bank, banks having presence in the area and other stakeholders to generate awareness of the various banking policies and regulations relating to the common person, obtain feedback from the public and provide grievance redressal to the extent possible at such meetings or facilitate approaching the appropriate machinery for such redressal.

2.2.6 District Level Review Committee (DLRC) Meetings

DLRC meetings are Chaired by the District Collector and attended by members of the District Consultative Committee (DCC). Public Representatives i.e. Local MPs/MLAs/ Zilla Parishad Chiefs are also invited to these meetings. The DLRC meetings should be convened by the Lead Banks at least once in a quarter. The DLRC is a forum to review the pace and quality of the implementation of various programmes under the Lead Bank Scheme in the district. Hence, association of non-officials is considered useful. Lead Banks are required to ensure the presence of public representatives in DLRC meetings as far as possible. Therefore, Lead Banks should fix the date of DLRC meetings with due regard to the convenience of the representatives of the public i.e. MPs/MLAs etc. and invite and involve them in all functions conducted by the banks in the districts, such as opening of new banking outlets, distribution of Kisan Credit Cards, SHG credit linkage programmes, etc. Responses to queries from public representatives need to be accorded highest priority and attended to promptly. The follow up of the DLRC’s decisions is required to be discussed in the DCC meetings.

2.2.7 DCC/DLRC meetings- Annual Calendar of Meetings

i) DCC and DLRC are the important fora facilitating coordination among commercial banks, Government agencies and others at the district level to review and find solutions to the problems hindering developmental activities. Therefore, it is necessary that all the members participate and deliberate in these meetings. On a review of the DCC/DLRC meetings, it was observed that late receipt/non-receipt of intimation of the date of meetings, clash of dates with other events, commonality of dates etc., hinder participation of members in these meetings, thus undermining the prime objective of conducting the above meetings.

ii) Lead Banks have, therefore, been advised to prepare an Annual Schedule of DCC and DLRC meetings on Calendar year basis for all districts in consultation with the Chairperson of the meetings, Lead District Officer of the RBI and Public Representatives in case of DLRC. This yearly Calendar should be prepared in the beginning of each year and circulated to all members as advance intimation for blocking future dates to attend the DCC and DLRC meetings and the meetings should be conducted as per the calendar. While preparing the Calendar, it should be ensured that DCC and DLRC meetings are not held simultaneously.

2.3 State Level Bankers’ Committee (SLBC)

2.3.1 Constitution of SLBC

i) The State Level Bankers’ Committee (SLBC) was constituted in April 1977, as an apex inter-institutional forum to create adequate coordination machinery in all States, on a uniform basis for development of the State. SLBC is chaired by the Chairman/ Managing Director/ Executive Director of the Convenor Bank. It comprises representatives of commercial banks including Small Finance Banks, Wholly Owned Subsidiaries (WOS) of Foreign Banks, RRBs, Payments Banks, State Cooperative Banks, RBI, NABARD, heads of Government departments including representatives from National Commission for Scheduled Castes/Tribes, National Horticulture Board, Khadi & Village Industries Commission etc. and representatives of financial institutions operating in a State, who come together and sort out coordination problems at the policy implementation level. Representatives of various organizations from different sectors of the economy like industry bodies, retail traders, exporters, farmers’ unions, etc. are special invitees in the SLBC meetings for discussing their specific problems, if any. SLBC meetings are held on quarterly basis. The responsibility for convening the SLBC meetings would be of the SLBC Convenor Bank of the State.

ii) Recognising that SLBCs, primarily as a committee of bankers at the State level, play an important role in the development of the State, illustrative guidelines on the conduct of State Level Bankers’ Committee meetings have been issued.

2.3.2 Conduct of SLBC Meetings

i) SLBC meetings are required to be held regularly at quarterly intervals. The meetings are chaired by the Chairman/ Managing Director/ Executive Director of the Convenor Bank and co-chaired by the Additional Chief Secretary or Development Commissioner of the State concerned. In cases where the Managing Director/Chief Executive Officer/Executive Director of the SLBC Convenor Bank is unable to attend SLBC Meetings, the Regional Director of the RBI shall co-chair the meetings along with the Additional Chief Secretary/Development Commissioner of the State concerned. A High Level of participation in SLBC/UTLBC meetings ensures an effective and desired outcome with meaningful discussion on issues of public policy of both the Government of India and the Reserve Bank of India.

ii) The Chief Minister/Finance Minister and senior level officers of the State/RBI (of the rank of Deputy Governor / Executive Director) may be invited to attend the SLBC meetings. Further, the State Chief Ministers are encouraged to attend at least one SLBC meeting in a year.

iii) State Level Bankers’ Committee meetings should primarily focus on policy issues with participation of only the senior functionaries of the banks/ Government Departments. All routine issues may be delegated to sub-committee(s) of the SLBC. A Steering Sub-committee may be constituted in the SLBC to deliberate on agenda proposals from different stakeholders and finalise a compact agenda for the SLBC meetings. Typically, the Sub-Committee could consist of SLBC Convenor, RBI & NABARD representatives & senior State Government representative from the concerned department, e.g. Finance/ Institutional Finance and two to three banks having major presence.

iv) Other issue-specific sub-committees may be constituted as required. The sub committees may examine the specific issues relating to agriculture, micro, small/medium industries/enterprises, handloom finance, export promotion and financial inclusion, etc. in-depth and devise solutions/recommendations for adoption by the full committee. They are expected to meet more frequently than the SLBC. The composition of the sub-committees and subjects/ specific issues impeding/enabling financial inclusion to be deliberated upon, may vary from State to State depending on the specific problems/issues faced by the States.

v) The secretariat/offices of the SLBC should be sufficiently strengthened to enable the SLBC Convenor Bank to effectively discharge its functions.

vi) The various fora at lower levels may give adequate feedback to the SLBC on issues that need to be discussed on a wider platform.

vii) Several institutions and academicians are engaged in research, studies etc. that have implications for sustainable development in agriculture and MSME sector. Engaging with such research institutions and academicians would be useful in bringing in new ideas for furthering the objectives of the Lead Bank Scheme. The SLBCs may, therefore, identify such academicians and researchers and invite them as ‘special invitees’ to attend SLBC meetings occasionally both for adding value to the discussions and also associate them with studies appropriate to the State. Other ‘special invitees’ may be invited to attend SLBC meetings depending on the agenda items/issues to be discussed in the meetings.

viii) The activities of NGOs in facilitating and channelling credit to the low income households are expected to increase in the coming years. Several corporate houses are also engaged in corporate social responsibility activities for sustainable development. A linkage with such NGOs/Corporate houses operating in the area to ensure that the NGOs/corporates provide the necessary ‘credit plus’ services can help leverage bank credit for inclusive growth. Success stories could be presented in SLBC meetings to serve as models that could be replicated.

2.3.3 Revised Agenda for SLBC Meetings

1. Review of financial inclusion initiatives, expansion of banking network and Financial Literacy:

1. Status of opening of banking outlets in unbanked villages, CBS-enabled banking outlets at the unbanked rural centres (URCs)

2. Review of Operations of Business Correspondents – hurdles/issues involved

3. Progress in increasing digital modes of payment in the State, provision of continuous connectivity with sufficient bandwidth, resolving connectivity issues/ connectivity options (Bharat Net, VSAT, etc.), installation of ATMs and PoS machines and status of implementation of e-receipts and e-payments in the State

4. Status of rollout of Direct Benefit Transfer in the State, Aadhaar seeding and authentication

5. Review of inclusion of Financial Education in the School Curriculum, financial literacy initiatives by banks (particularly digital financial literacy)

6. Creating awareness about various schemes, subsidies, facilities e.g. crop insurance, renewable energy

7. Review of efforts towards end to end projects involving all stakeholders in the supply chain.

2. Review of credit disbursement by banks:

1. Achievement under ACP of the State, Priority Sector Lending

2. Discussion on lending towards government sponsored schemes (DAY-NRLM, DAY-NULM, MUDRA, Stand-Up India, PMEGP, etc.) and impact of these schemes

3. Flow of credit to MSMEs and for affordable housing

4. KCC loan, crop insurance under PMFBY

5. Grant of Education Loans

6. Progress under SHG-bank linkage.

3. Doubling of Farmers’ Income by 2022.

4. CD Ratio, Review of Districts with CD Ratio below 40% and working of Special Sub-Committees of the DCC (SSC).

5. Position of NPAs in respect of schematic lending, Certificate Cases and Recovery of NPAs.

6. Review of restructuring of loans in natural calamity affected districts in the State, if any.

7. Discussion on policy initiatives of the Central/State Government/RBI (Industrial Policy, MSME Policy, Agriculture Policy, Start-Up Policy, etc.), and expected involvement of banks.

8. Discussion on improving rural infrastructure/ credit absorption capacity:

1. Any large project conceived by the State Government to help improve C-D Ratio

2. Explore the scope of state-specific potential growth areas and the way forward – choosing partner banks

3. Discussion on findings of region-focused studies, if any, and implementing the suggested solutions

4. Identification of gaps in rural and agriculture infrastructure which need financing (rural godowns, solar power, agro processing, horticulture, allied activities, agri-marketing etc.)

5. Implementation of Model Land Leasing Act 2016 (exploring possibility).

9. Efforts towards skill development on mission mode partnering with Krishi Vigyan Kendra (KVK), Horticulture Mission, National Skill Development Corporation, Agriculture Skill Council of India (ASCI), etc. including a review of functioning of RSETIs.

10. Steps taken for improving land record, progress in digitization of land records and seamless loan disbursements.

11. Sharing of success stories and new initiatives at the district level that can be replicated in other districts or across the State.

12. Discussion on Market Intelligence Issues e.g.:

1. Ponzi Schemes/ Illegal Activities of Unincorporated Bodies/ Firms/ Companies Soliciting Deposits from the Public

2. Banking Related Cyber Frauds, phishing, etc.

3. Instances of usurious activities by lending entities in the area, cases of over indebtedness

4. Credit related frauds by borrower groups, etc.

13. Issues remaining unresolved at DCC/DLRC meeting.

14. Timely submission of data by banks, adhering to the schedule of SLBC meeting.

15. Any other item, with the permission of the Chair.

The above list is illustrative and not exhaustive. SLBC Convenor Banks may include any other agenda item considered necessary.

2.3.4 SLBC – Yearly Calendar of Meetings

i) To improve the effectiveness and streamline the functioning of SLBC/UTLBC meetings, SLBC Convenor Banks have been advised to prepare a yearly calendar of programmes (calendar year basis) in the beginning of the year itself, for conducting the meetings. The calendar of programmes should clearly specify the cut off dates for data submission to SLBC and acceptance thereof by the SLBC Convenor. This yearly calendar should be circulated to all the concerned as an advance intimation for blocking of future dates of senior functionaries of various agencies like Central Government, State Governments, banks, RBI, etc. The SLBC/UTLBC meetings should be conducted as per the calendar under all circumstances. The agenda should also be circulated in advance without waiting for the data from defaulting banks. The matter should, however, be taken up with the defaulting banks in the SLBC meeting. In addition, the SLBC Convenor Bank should write a letter in this regard to the controlling office of the defaulting banks under advice to the Regional Office of RBI. The SLBC Convenor Bank will, however, continue to follow-up with banks for timely data submission. Further, in case the Chief Minister, Finance Minister or other very senior functionaries are not able to attend the SLBC on some very rare occasion, then if so desired by them, a special SLBC meeting can be held. Following broad guidelines should be used for preparation of the calendar of programmes:

ii) The objective of preparing the calendar of meetings in the beginning of the year is to ensure adequate notice of these meetings and timely compilation and dispatch of agenda papers to all stakeholders. It also ensures clear cut guidelines for the submission of data to SLBC Convenors by participating banks & Government Departments. It is expected to save precious time of SLBC Convenors otherwise spent in taking dates from various senior functionaries attending these SLBC meetings.

iii) SLBC Convenor Banks need to appreciate the advantages of ensuring adherence to the yearly calendars. SLBC Convenor Banks have therefore been advised to give wide publicity to the annual calendar at the beginning of the year and ensure that dates of senior functionaries expected to attend the meetings are blocked for all meetings by their offices. In case, despite blocking dates, if for some reason, the senior functionary is not able to attend the meeting, the meeting should be held as planned in the calendar. More importantly, the data for review in these meetings should be received as per deadlines set in the calendar and those who do not submit the data in time should be asked to explain the reasons for delay in sending the data that may be recorded in the minutes of the meeting. Under no circumstance, should the preparation of the agenda be delayed beyond the dates stipulated as per the calendar.

2.3.5 SLBC Website – Standardisation of information /data

SLBC Convenor Banks are required to maintain the SLBC websites where all instructions pertaining to LBS and Government Sponsored Schemes are made available and are accessible to the common man desiring any information relating to the conduct of meetings or State-wise data/bank-wise performance. In order to standardize the information and data that is to be made available on the SLBC website, an indicative list of the information & data is given in the Annex II. SLBCs should arrange to place the prescribed minimum information on the websites of SLBCs of their bank and keep it updated regularly, at least on quarterly basis. Banks may note that the list is only indicative and SLBCs are free to put any additional information considered relevant for the State.

2.3.6 Liaison with State Government

SLBC Convenor Banks are expected to co-ordinate the activities of all banks in the State, discuss with State Government officials, the operational problems in lending, extending necessary support for banking development and to achieve the objective of financial inclusion.

2.3.7 Capacity Building/Training/Sensitization Programmes

i) There is a need for sensitising the District Collectors and CEOs of Zilla Parishads on banks and banking in general as also on the specific scope and role of the Lead Bank Scheme. In each State, a full day ‘Sensitisation Workshop’ may be convened by the SLBC Convenor Bank every year, preferably in April/May. Such sensitisation should form part of the probationary training of such officers. Further, as soon as they are posted in a district, the SLBC may arrange for exposure visits for the District Collectors to the SLBC Convenor’s office for sensitisation and understanding of the Lead Bank Scheme.

ii) Staff at the operational level of banks and government agencies associated with implementation of the Lead Bank Scheme need to be aware of the latest developments and emerging opportunities. There is need for staff sensitisation/ training/seminars, etc. at periodic intervals on an ongoing basis.

3. Implementation of Lead Bank Scheme

3.1 Preparation of credit plans

Planning plays an important role in the implementation of the Lead Bank Scheme and a bottom-up approach is adopted to map the existing potential for development. Under LBS, planning starts with identifying block-wise/ activity-wise potential estimated for various sectors.

3.2 Potential Linked Credit Plans (PLPs)

i) Potential Linked Credit Plans (PLPs) are a step towards decentralized credit planning with the basic objective of mapping the existing potential for development through bank credit. PLPs take into account the long term physical potential, availability of infrastructure support, marketing facilities, and policies/programmes of Government etc. NABARD to take measures to ensure that PLPs should be more focussed and implementable so that banks can utilize them more gainfully while preparing the Branch Credit Plan. PLPs should emphasise on promotion of sustainable agricultural practices suitable to local conditions. While preparing the PLPs, the focus must be on identifying processes and projects that:

1. reduce the carbon foot-print,

2. prevent the overuse of fertilizers,

3. ensure efficient utilisation of water and

4. address agricultural pollution issues.

The plans must also focus on promoting innovative farming systems such as organic farming, bio dynamic farming, permaculture and sustainable small-scale farming, as also promoting Farmer Producer Organisations (FPOs) and Farmers’ Markets. Such initiatives must be supported by appropriate investments and project finance frameworks.

ii) A pre-PLP meeting is convened by LDM during June every year to be attended by banks, Government agencies, etc., to reflect their views and concerns regarding credit potential (sector/activity-wise) and deliberate on major financial and socio-economic developments in the district in the last one year and priorities to be set out for inclusion in the PLP. The DDM of NABARD makes a presentation in this meeting outlining the major requirements of information for preparing the PLP for the following year. The preparation of PLP for the next year is to be completed by August every year to enable the State Government to factor in the PLP projections.

iii) The procedure for preparing the District Credit Plan is as follows:

1. Controlling Offices of commercial banks including Small Finance Banks, Wholly Owned Subsidiaries (WOS) of Foreign Banks and Head Office of RRB and DCCB/LDB circulate the accepted block-wise/activity-wise potential to all their branches for preparing the Branch Credit Plans (BCP) by their respective branch managers. Banks should ensure that the exercise of preparation of branch/block plans is completed in time by all branches so that the Credit Plans become operational on time.

2. A special Block Level Bankers’ Committee (BLBC) meeting is convened for each block where the Branch Credit Plans are discussed and aggregated to form the Block Credit Plan. The DDM and the LDM guide the BLBC in finalizing the plan, ensuring that the Block Credit Plan is in tune with the potentials identified activity-wise including in respect of Government Sponsored Schemes.

3. All the Block Credit Plans of the district are aggregated by the LDM to form the District Credit Plan (DCP). This plan indicates an analytical assessment of the credit needs of the district to be deployed by all the financial institutions operating in the district and the total quantum of funds to be earmarked as credit by all the financial institutions for a new financial year. The Zonal/Controlling Offices of banks, while finalizing their business plans for the year, should take into account the commitments made in the DCP which should be ready well in time before the performance budgets are finalized.

4. The District Credit Plan is then placed before the DCC by the Lead District Manager for final acceptance/approval. All the District Credit Plans are eventually aggregated into a State Level Credit Plan to be prepared by SLBC Convenor Bank and launched by the 1st of April every year.

5. The corporate business targets for branches, blocks, districts and states may be aligned with the Annual Credit Plans (ACP) to ensure better implementation. The Controlling Offices of the banks in each state should synchronize their internal business plans with the ACP.

3.3 Monitoring the Performance of Credit Plans

The performance of the credit plans is reviewed in the various fora created under the Lead Bank Scheme as shown below:

Monitoring of LBS by RBI – Monitoring Information System (MIS)

i) Data on Annual Credit Plan (ACP) is an important element to review the flow of credit in the State. ACP formats are aligned with the extant reporting guidelines on priority sector lending. Accordingly, the ACP is to be prepared considering the categories of priority sector that would include Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy and Others. Further, it has been decided that bank loans to Micro/Small and Medium Enterprises (Services), engaged in providing or rendering of services as defined in terms of investment in equipment under MSMED Act, 2006, shall qualify under priority sector without any credit cap. The reporting statement for ACP target is LBS-MIS-I (Annex IV), statement for disbursement and outstanding LBS-MIS-II (Annex V) and ACP achievement vis-à-vis ACP target, LBS-MIS-III (Annex VI). SLBC Convenor Banks/ Lead Banks have been advised to prepare the statements LBS MIS I, II and III as per the revised formats starting from the financial year 2018-19. They should prepare the bank group wise statements of LBS-MIS-I, II and III as per the prescribed formats and also place these statements for meaningful review in all DCC and SLBC meetings.

ii) In order to maintain consistency and integrity of data with the All-India data of scheduled commercial banks and facilitate a meaningful review/analysis of data, the ACP data needs to be grouped separately for scheduled commercial banks and other banks like State Cooperative Banks, DCCBs, etc. while presenting in the DCC/SLBC meetings and submitting to our Regional Offices. The data pertaining to scheduled commercial banks needs to be further grouped into public sector banks, private sector banks, Regional Rural Banks, Small Finance Banks and Wholly Owned Subsidiaries (WOS) of Foreign Banks to know the bank group wise position.

3.4 Revised mechanism of Data Flow for LBS fora meetings

At present, discussions at the quarterly meetings of the various LBS fora viz. State Level Bankers’ Committee (SLBC), District level Consultative Committee (DCC) and Block Level Bankers’ Committee (BLBC) primarily focus on the performance of banks in the disbursement of loans vis-a-vis the allocated target under the Annual Credit Plan. The integrity & timeliness of the data submitted by banks for the purpose has been an issue as a significant portion of this data is manually compiled and entered into the Data Management Systems of the SLBC Convenor Banks. The extent to which this data corresponds with the data present in the Core Banking Solution (CBS) of the respective banks also varies significantly. Therefore, there is need of a standardized system to be developed on the website maintained by each SLBC to enable uploading and downloading of the data pertaining to the Block, District as well as the State. The relevant data must also be directly downloadable from the CBS and/ or MIS of the banks with a view to keeping manual intervention to a minimal level in the process. The procedure relating to the envisaged intervention in this area is given below:

Management of Data Flow at LBS Fora – Procedure

1. Each bank’s CBS should have a provision to generate a report pertaining to all LBS related data/ tables to Excel. This data should have information pertaining to all the branches operating in the state including fields/ columns for District & Block name. Access to Download & Export this data from the bank’s CBS should be given to the Controlling Offices of the banks who would be solely responsible for the process of ‘Data Feeding’ for all districts/ blocks within their jurisdiction.

2. The ‘Data Feeding’ process is the process of uploading this Excel file (downloaded in step (i) above) on the SLBC websites. SLBC websites should have a provision to ‘Import/ Upload’ all the data present in the Excel Sheet on the database of the SLBC website. This would obviate any manual ‘data entry’ at the SLBC/ Controlling Office level.

3. To facilitate the above functionality, each SLBC Convenor Bank would have to add this ‘Import/ Upload’ functionality to their SLBC website along with the requisite capabilities at the back-end.

4. The SLBC website would, thus, effectively work as a data aggregation platform. Further, data analysis capabilities could also be added to the SLBC websites depending on the available resources.

5. The SLBC websites should provide access to LDMs to download district and block specific data directly from this website thus ensuring integrity and timely availability of data.

6. There could still be some data pertaining to State Government Schemes/ other data that is not available on the CBS or MIS of the banks. This would have to be collated at the Controlling Office level as is done now. At the SLBC website, functionalities could be provided to enter this data too. This could then be downloaded by the LDMs for district/ block level reports. Banks may also add Open Format fields like ‘text boxes’ for data or information that is special or is entered/ used once in a while.

7. Such a system ensures that LDMs & SLBC Convenor Banks have to do zero or minimal data entry/ feeding and all data is entered by a single ‘custodian of data’ which is the Controlling Office of each bank. Any information to be provided by Government extension agencies could also be similarly uploaded.

Necessary modifications may be made on the SLBC websites and to the CBS & MIS systems of all banks to implement the envisaged data flow mechanism.

A Working Group of select SLBC Convenor banks and NABARD was constituted by RBI to work out a standardised system for collection, storage, presentation and management of data on the SLBC/ UTLBC website. A Standard Operating Procedure (SOP), which may be followed by SLBC/ UTLBC Convenor Banks, member banks and LDMs, as suggested by the Working Group for management of the data flow is given at Annex III.

4. Assignment of Lead Bank Responsibility

i) Lead Bank Scheme is administered by the Reserve Bank of India since 1969. The assignment of Lead Bank responsibility to designated banks in every district is done by the Reserve Bank of India following a detailed procedure formulated for this purpose. As on March 31, 2021, 12 public sector banks and one private sector bank have been assigned Lead Bank responsibility in 730 districts of the country.

ii) State Level Bankers’ Committee (SLBC)/Union Territory Level Bankers’ Committee (UTLBC), as an apex level forum at the State/Union Territory (UT) level, coordinates the activities of the financial institutions and Government departments in the State/Union Territory under the Lead Bank Scheme. SLBC/UTLBC Convenorship is assigned to banks for this purpose. As on March 31, 2021, the SLBC/ UTLBC convenorship of 28 States and 8 Union Territories has been assigned to 11 public sector banks and one private sector bank. A List of State/UT wise SLBC/UTLBC Convenor Banks and district wise Lead Banks is given in Annex I.

iii) The Lead Bank Scheme (LBS) has been extended to the districts in the metropolitan areas, thus bringing the entire country under the fold of the Lead Bank Scheme.

5. Banking Penetration

i) Over the years, the focus of the Lead Bank Scheme has shifted to inclusive growth and financial inclusion. The use of Information Technology (IT) and intermediaries has enabled banks to increase the outreach, scale and depth of banking services at affordable cost.

ii) SLBC Convenor Banks / Lead Banks are advised to focus attention on the need for achieving 100% financial inclusion through penetration of banking services in the rural areas. Upon issuance of DoR revised guidelines on ‘Rationalisation of Branch Authorisation Policy’ on May 18, 2017 clarifying on ‘Banking Outlet’, banks were advised to consider opening of a CBS-enabled banking outlet or a part time banking outlet, as the case may be, in unbanked rural centres.

iii) SLBC Convenor Banks should take up with the State Governments, impeders such as issues of road/digital connectivity, conducive law and order situation, uninterrupted power supply, adequate security, etc. for ensuring banking expansion at all centres where penetration by the formal banking system is required. However, these impeders should not inhibit the scaling up of financial inclusion initiatives.

5.1 Roadmap for providing banking services in unbanked villages

In November 2009, a roadmap to provide banking services in villages with population more than 2000 was rolled out. All the identified villages have been provided with banking services through branches, business correspondents or through other modes such as ATMs and mobile vans. Later, in June 2012, a roadmap to provide banking services in unbanked villages with less than 2,000 population was rolled out. SLBC Convenor Banks and Lead Banks were advised to complete the process of providing banking services in unbanked villages with population below 2000 by August 14, 2015.

5.2 Roadmap for opening brick and mortar branches in villages with population more than 5000 without a bank branch of a scheduled commercial bank

As brick and mortar branches are an integral component of financial inclusion, it was decided to focus on villages with population above 5000 without a bank branch of a scheduled commercial bank. This was to enable banks to provide quality financial services and timely support to BC outlets that would help in sustaining and strengthening the services provided through BCs and also ensuring close supervision of BC operations. Accordingly, SLBC Convenor Banks were advised to identify villages with population above 5000 without a bank branch of a scheduled commercial bank in their State and allot these villages among scheduled commercial banks (including Regional Rural Banks) for opening of branches.

5.3 Aligning roadmap for unbanked villages having population more than 5000 with revised Guidelines on Branch Authorisation Policy

In terms of circular DBR.No.BAPD.BC.69/22.01.001/2016-17 dated May 18, 2017 issued by DoR on ‘Rationalisation of Branch Authorisation Policy – Revision of Guidelines’, final guidelines on ‘Banking Outlets’ have been issued with a view to facilitate financial inclusion as also to provide flexibility to banks on the choice of delivery channel. Accordingly, SLBC Convenor Banks have been advised to identify all unbanked rural centres (URCs) in the State, compile and maintain an updated list of all such centres. The updated list should be displayed on the website of each SLBC to facilitate banks to choose/indicate the place/centre where they wish to open a ‘banking outlet’.

ii) Further, SLBC Convenor Banks have been advised that in order to comply with the criteria of opening at least 25 percent of the total banking outlets in unbanked rural centres in Tier 5 & 6 centres, as prescribed vide DoR circular dated May 18, 2017, banks should give priority to villages without a banking outlet having population more than 5000 (i.e. Tier 5 centres) and ensure that all such villages under their jurisdiction are covered with a CBS-enabled Banking Outlet on priority basis.

iii) The updated list of unbanked rural centres should be tabled in all SLBC meetings during discussions on the progress of providing banking services in unbanked rural centres.

5.4 National Strategy for Financial Inclusion (NSFI): 2019-2024 – Universal Access to Financial Services

Providing banking access to every village within a 5 KM radius / hamlet of 500 households in hilly areas has been one of the key objectives of the National Strategy for Financial Inclusion (NSFI): 2019-2024. Accordingly, SLBC/ UTLBC Convenor banks have been advised to review the presence of banking outlets of Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Small Finance Banks (SFBs) and Payments Banks (PBs) in every village within a 5 KM radius / hamlet of 500 households in hilly areas under their jurisdiction(s) and ensure that universal access to financial services are provided to all such villages.

6. Credit Deposit Ratio (CD Ratio)

6.1 CD Ratio of Banks in Rural and Semi-Urban Areas

Banks have been advised to achieve a CD Ratio of 60 percent in respect of their rural and semi-urban branches separately on an All-India basis. While it is not necessary that this ratio should be achieved separately, branch-wise, district-wise or region-wise, the banks should, nevertheless, ensure that wide disparity in the ratios between different States / Regions is avoided in order to minimise regional imbalance in credit deployment. The credit dispensation in certain districts is very low, as a result of various factors such as lack of necessary infrastructure, varying ability of different regions to absorb credit, etc. Banks may review the performance of their bank branches in such areas and take necessary steps to augment the credit flow. The Lead Banks may discuss the problem in all its aspects with the other financial institutions in the district and also in the DCC forum.

6.2 Implementation of the Recommendations of the Expert Group on CD Ratio

i) An Expert Group was constituted by the Government of India to go into the nature and magnitude of the problem of low CD Ratio across States / Regions and to suggest steps to overcome the problem. The Expert Group examined the problems and causes of low CD Ratio and made recommendations. As per the recommendations, the CD Ratio of banks should be monitored at different levels based on the following parameters –

Where:

Cu = Credit as per place of Utilization
Cs = Credit as per place of Sanction
RIDF = Total Resource support provided to States under RIDF
Further, banks are advised that:

• In the districts having CD Ratio less than 40 percent, Special Sub-Committees (SSCs) of the DCC shall be set up to monitor the CD Ratio.

• Districts having CD Ratio between 40 and 60 percent, shall be monitored under the existing system by the DCC, and

• The district with CD Ratio of less than 20 percent need to be treated on a special footing.

ii) Special Sub-Committees (SSCs) of the DCC should be set up in the districts having CD Ratio less than 40 percent, in order to monitor the CD Ratio and to draw up Monitorable Action Plans (MAPs) to increase the CD Ratio. The Lead District Manager (LDM) is designated as the Convenor of the SSC which, in addition to the District Co-ordinators of banks functioning in the area, should comprise of the LDO of RBI, the DDM of NABARD, the District Planning Officer or a representative of the Collector duly empowered to take decisions on behalf of the district administration.

The functions of the Special Sub-Committee are as under:

• The SSCs should draw up Monitorable Action Plans (MAPs) for improving the CD Ratio in their districts on a self-set graduated basis.

• For this purpose, the SSC should hold a special meeting immediately after its constitution and on the basis of the various ground level parameters, set for itself, a target for increasing the CD Ratio initially for the current year. It will also, at the same meeting, set a definite time frame to achieve a CD Ratio more than 60 percent in annual increments.

• Consequent to the completion of this process, the target and time frame self-set by the SSC should be placed before the DCC for approval.

• The plans for implementation must then be taken up by the SSC and monitored assiduously once in two months.

• The SSC should report the progress on the implementation of the plan to the DCC on a quarterly basis and through them to the Convenor of the SLBC.

• On the basis of the feedback received from the DCC regarding the progress in the implementation of the Monitorable Action Plans (MAPs), a consolidated report should be prepared by the SSC and tabled at all SLBC meetings for discussion / information.

iii) As regards the districts with a CD Ratio less than 20 percent, these are generally located in hilly, desert or inaccessible terrains and / or those dependent solely on the primary sector and/ or characterized by a breakdown of the law and order machinery. In such areas, conventional methods are not likely to work unless the banking system and the State Government come together in a specially meaningful way.

iv) While the framework for implementation for raising the CD Ratio in these districts will be the same as in the case of districts with CD Ratio below 40 percent (i.e. setting up of SSC etc.), the focus of attention and the level of efforts should be of a much higher scale.

For this,

• All such districts should first be placed in a special category.

• Thereafter, the responsibility for increasing their CD Ratio should be taken by banks and State Governments and the districts should be “adopted” by the District Administration and the Lead Bank jointly.

• While banks would be responsible for credit disbursement, the State Government would be required to give an upfront commitment regarding its responsibilities for creation of identified rural infrastructure together with support in creating an enabling environment for banks to lend and to recover their dues.

• Progress in the special category districts should be monitored at the district level and reported to the corporate offices of the concerned banks.

• The Chairmen/ Managing Directors of banks should give special attention to the CD Ratio in such districts.

7. Direct Benefit Transfer

Direct Benefit Transfer (DBT) was rolled out by the Government of India in selected districts in January 2013. It was expanded to other districts subsequently. SLBC Convenor Banks were advised to co-ordinate with the Government authorities to implement DBT. Banks were advised to include the status of the roll-out of DBT as a regular agenda item for discussion in SLBC meetings as part of Financial Inclusion/Direct Benefit Transfer (DBT) implementation. As a prerequisite to the implementation of the DBT, every eligible individual should have a bank account. Further, to make disbursements at the doorstep through the ICT-based BC model, banking outlets either through brick & mortar branches or the branchless mode is needed in all villages across the country. Hence, banks have been advised to:

• take steps to complete the opening of bank accounts and seeding of Aadhaar numbers in all bank accounts.

• closely monitor the progress in seeding of Aadhaar number with the bank accounts of beneficiaries.

• put in place a system to provide the beneficiary of the seeding request an acknowledgement and also send a confirmation of the seeding of Aadhaar number.

• form a DBT Implementation Co-ordination Committee, along with the State Government department concerned, at district level and review the seeding of Aadhaar numbers in bank accounts.

• ensure that district and village wise names and other details of business correspondents (BCs) engaged/other arrangements made by the bank are displayed on the SLBC website.

• set up a Complaint Grievance Redressal mechanism in each bank and nominate a Complaint Redressal Officer in each district, to redress the grievances related to ‘seeding of Aadhaar number in bank accounts’.

Banks were further advised to ensure that opening of bank accounts and seeding of Aadhaar numbers with existing or new accounts of eligible beneficiaries opened for the purpose of Direct Benefit Transfer (DBT) under social welfare schemes, was in conformity with the provisions listed under Section 16 of the Master Direction – Know Your Customer (KYC) Direction, 2016 (updated as on May 29, 2019) and extant provisions of the Prevention of Money Laundering (PML) Rules.

8. Service Area Approach (SAA)

i) The Service Area Approach (SAA), introduced in April 1989 for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks. Under SAA, each bank branch in a rural or semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area. The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.

ii) The Service Area Approach scheme was reviewed in December 2004 and it was decided to dispense with the restrictive provisions of the scheme while retaining the positive features of the SAA such as credit planning and monitoring of the credit purveyance. Accordingly, under SAA, the allocation of villages among the rural and semi-urban branches of banks were made not applicable for lending except under Government Sponsored Schemes. Thus, while the commercial banks and RRBs are free to lend in any rural and semi-urban area, the borrowers have the choice of approaching any branch for their credit requirements.

8.1 Dispensing with ‘No Due Certificate’

In order to ensure hassle free credit to all borrowers, especially in rural and semi-urban areas and keeping in view the technological developments and the different ways available with banks to avoid multiple financing, banks have been advised to dispense with obtaining a ‘No Due Certificate’ from the individual borrowers (including SHGs & JLGs) in rural and semi-urban areas for all types of loans including loans under Government Sponsored Schemes, irrespective of the amount involved unless the Government Sponsored Scheme itself provides for obtention of a ‘No Due Certificate’. Further, it has been clarified that the policy of dispensing with a ‘No Due Certificate’ for lending by banks is also applicable to urban areas including metropolitan cities.

ii) Banks are encouraged to use an alternative framework of due diligence as part of the credit appraisal exercise other than the ‘No Due Certificate’ which could, among others, consist of one or more of the following:

• Credit history check through Credit Information Companies (CICs)

• Self-declaration or an affidavit from the borrower

• CERSAI registration

• Peer monitoring

• Information sharing among lenders

• Information search (writing to other lenders with an auto deadline)

iii) Banks are also advised to submit information/data to all Credit Information Companies (CICs), as required in terms of extant instructions issued by RBI.

9. Doubling of Farmers’ Income by 2022

i) The Government of India, in the Union Budget 2016-17, had announced its resolve to double the income of farmers by 2022. Several steps have been taken towards attaining this objective including setting up of an inter-ministerial committee for preparation of a blue print for the same. This agenda has also been reiterated by the government in several fora and has acquired primacy from the point of view of rural and agricultural development.

ii) The strategy to achieve this goal, inter-alia, includes,

• Focus on irrigation with large budgets, with the aim of “per drop, more crop”

• Provision of quality seeds and nutrients based on soil health of each field

• Investments in warehousing and cold chains to prevent post-harvest crop losses

• Promotion of value addition through food processing

• Creation of a national farm market, removing distortions and development of infrastructure such as e-platform across 585 stations

• Strengthening of the crop insurance scheme to mitigate risks at affordable cost

• Promotion of ancillary activities like poultry, bee-keeping and fisheries

iii. Needless to emphasize that acceleration in income generation is significantly dependent on better capital formation in agriculture. Towards this, banks should revisit their documentation for crop loans, simplify them where required and ensure speedy sanctioning and disbursal of loans within specified time limits.

iv. The Lead Bank Scheme, which ensures inter-departmental/governmental coordination in the financial sector, should, therefore, be leveraged to further the objective of doubling farmers’ income by 2022. Lead Banks are accordingly advised to ensure the following:

1. Work closely with NABARD in the preparation of Potential Linked Credit Plans (PLPs) & Annual Credit Plans (ACPs) keeping the above strategy in consideration

2. Include ‘Doubling of Farmers’ Income by 2022’ as a regular agenda under the Lead Bank Scheme in various fora such as SLBC, DCC, DLRC and BLBC

3. For the purpose of monitoring and reviewing the progress, Lead Banks may use the benchmarks as may be provided by NABARD

4. Map the overall strategy as given in para 9 (ii) above to the agriculture/agro-ancillary lending plan of the bank.

10. Expanding and Deepening of Digital Payments Ecosystem

With a view to expanding and deepening the digital payments ecosystem, the SLBCs/UTLBCs were advised to identify one district in their respective States/UTs on a pilot basis in consultation with banks and stakeholders and allocate it to a bank with significant footprint which will endeavour to make the district 100% digitally enabled within one year, in order to enable every individual in the district to make/ receive payments digitally in a safe, secure, quick, affordable and convenient manner. SLBC/ UTLBC Convenor Banks were also advised to devise a time bound roadmap to all branches of member banks (Public Sector Banks, Private Sector Banks, Regional Rural Banks, Small Finance Banks and Payments Banks) located in the identified district(s) for on-boarding merchants/ traders/ businesses/ utility service providers to facilitate fully digital transactions. Further, SLBC/ UTLBC Convenor Banks were advised to constitute a Sub-Committee on Digital Payments at SLBC/ UTLBC level.

11. References of Directions / Circulars Relevant to Lead Bank Scheme

Appendix

List of Circulars/Guidelines/Instructions

RBI/2021-22/05
FIDD.GSSD.CO.BC.No.04/09.01.01/2021-22

April 01, 2021

The Chairman/ Managing Director & CEO
Public Sector Banks,
Private Sector Banks (including Small Finance Banks).

Madam/Dear Sir

Master Circular – Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)

Please refer to the Master Circular FIDD.GSSD.CO.BC.No.06/09.01.01/2020-21 dated September 18, 2020 on Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).

The Master Circular has been suitably updated by incorporating the modifications in DAY-NRLM scheme issued up to April 01, 2021, which are listed in the appendix and also been placed on website (https://www.rbi.org.in).

Yours faithfully,

(Kaya Tripathi)
Chief General Manager

Master Circular
Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)

1. Background

The Ministry of Rural Development (MoRD), Government of India launched the National Rural Livelihood Mission (NRLM) by restructuring Swarnajayanti Gram Swarojgar Yojana (SGSY) with effect from 01st April 2013 (RBI Circular No. RBI/2012-13/559 dated 27 June 2013). NRLM was renamed as DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihoods Mission) w.e.f. March 29, 2016. The DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihoods. DAY-NRLM adopts a demand driven approach, enabling the States to formulate their own State specific poverty reduction action plans. The blocks and districts in which all the components of DAY-NRLM would be implemented, either through the SRLMs or partner institutions or NGOs, would be the intensive blocks and districts, whereas remaining would be non-intensive blocks and districts. The key features of DAY-NRLM have been furnished in Annex I.

2. Women SHGs and their Federations

2.1 Women SHGs under DAY-NRLM consist of 10-20 persons. In case of special SHGs i.e. groups in the difficult areas, groups with disabled persons, and groups formed in remote tribal areas, this number may be a minimum of 5 persons.

2.2 DAY-NRLM promotes affinity-based women Self Help Groups (SHGs).

2.3 Only for groups to be formed with Persons with disabilities, and other special categories like elder, transgender, DAY-NRLM will have both men and women in the Self-Help Groups.

2.4 SHG is an informal group and registration under any Societies Act, State cooperative Act or a partnership firm is not mandatory vide Circular RPCD.No. Plan BC.13/PL-09.22/90-91 dated July 24th, 1991. However, Federations of Self Help Groups formed at Village, Gram Panchayat, Cluster or higher level may be registered under appropriate acts prevailing in their respective states.

Financial Assistance to the SHGs

3. Revolving Fund: DAY-NRLM, MoRD, would provide Revolving Fund (RF) support to SHGs in existence for a minimum period of 3/6 month and follow the norms of good SHGs, i.e. they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts. Only such SHGs that have not received any RF earlier would be provided with RF, as corpus, with a minimum of ₹10,000 and up to a maximum of ₹15,000 per SHG. The purpose of RF is to strengthen their institutional and financial management capacity and build a good credit history within the group.

4. Capital Subsidy has been discontinued under DAY-NRLM:

No Capital Subsidy would be sanctioned to any SHG from the date of implementation of DAY-NRLM.

5. Community Investment Support Fund (CIF)

CIF would be provided by MoRD to the SHGs promoted under DAY – NRLM in all blocks (intensive and non-intensive) and would be routed through the Village level/ Cluster level Federations, to be maintained in perpetuity by the Federations. The CIF would be used, by the Federations, to advance loans to the SHGs and/or to undertake the common/collective socio-economic activities.

6. Introduction of Interest subvention:

DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of ₹ 300,000/- per SHG. This would be available across the country in two ways:

(i) In 250 identified districts, banks may lend to the women SHGs @7% up to an aggregated loan amount of ₹300,000/-. The banks would be subvented to the extent of difference between the Weighted Average Interest Charged and 7%, subject to the maximum limit of 5.5%. An additional interest subvention of 3% is also available on prompt repayment by the SHGs, reducing the effective rate of interest to 4%.

(ii) In the remaining districts, the banks may lend at their respective lending rates, applicable to SHGs. In these districts, all women SHGs under DAY– NRLM would be eligible for interest subvention on prompt repayment. The difference between the bank lending rates and 7% for loans up to ₹ 300,000/- subject to a maximum limit of 5.5%, would be subvented directly in the loan accounts of the SHGs by the SRLMs. This part of the scheme would be operationalized by the SRLMs.

• Salient features of the Scheme are enclosed in Annex II.

• The list of 250 identified districts is as per Annex III.

• Subvented interest rate would be communicated separately to the banks by GoI/RBI.

7. Role of banks:

7.1 Opening of Savings account:

7.1.1 Opening of Savings account of SHGs: The role of banks would commence with opening of accounts for all the Women SHGs including members with disability and the Federations of the SHGs. The SHGs engaged in promoting of savings habits among their members would be eligible to open savings bank accounts.

(i) Know Your Customer (KYC) verification of only the office bearers shall suffice for opening of savings bank account.

(ii) Banks may not insist on Permanent Account Number (PAN) of SHGs at the time of opening of account or transactions and may accept declaration in Form No 60 as may be required.

(iii) For KYC verification pertaining to SHG members during opening of accounts, instructions of Department of Banking Regulation in Master Direction on KYC (dated February 25, 2016, updated as on March 23, 2021) shall be adhered to while completing Customer Due Diligence (CDD) process. CDD means identifying and verifying the customer and the beneficial owner. Accordingly, the current instructions under Simplified norms for Self Help Groups (SHGs) mention that while opening of accounts Customer Due Diligence (CDD) of all the members of SHG shall not be required and CDD of only the office bearers shall suffice. At the time of credit linking of SHGs, banks may undertake KYC verification of all the members in the SHG. However, opening of savings account of all members with the bank shall not be made a prerequisite for credit linkage of SHGs. Banks are advised to maintain separate Savings and loan account for Self Help Groups.

(iv) Business Correspondents deployed by banks may also be authorized to open Saving Bank Accounts of the SHGs after verification/approval of the base branch, subject to adherence to extant BC guidelines and in accordance with the bank’s Board approved policy on Business Correspondents. However, ensuring compliance with KYC and AML norms under the BC model continues to be the responsibility of the banks.

7.1.2 Opening of Savings account of Federation of SHGs: Banks are advised to open savings account of Federations of SHGs at village, Gram Panchayat, Cluster or higher level. These accounts may be categorized as savings account for ‘Association of persons’. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

7.1.3 Opening of Current Account of Producer Groups (PGs): In order to facilitate collective production and marketing for their produce, banks are advised to open current account for Producer Groups promoted under DAY-NRLM at village, Gram Panchayat, Cluster or higher level. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

7.1.4 Transaction in Savings/Cash Credit account of SHGs and Federation of SHGs: SHGs and their federations may be encouraged to transact through their respective saving accounts and Cash Credit Loan accounts on regular basis. To facilitate this, banks are advised to enable transactions in jointly operated savings/Cash Credit account of SHGs and their federations with interoperable facility at retail outlets managed by Business Correspondents. Banks are also advised to extend all such services to SHGs and their federations through Business Correspondents as per their board approved policies.

7.2 Lending Norms to individual SHG members and SHGs

7.2.1 The eligibility criteria for the SHGs to avail loans:

• SHGs should be in active existence at least since the last 6 months as per the books of account of SHGs and not from the date of opening of S/B account.

• SHGs should be practicing ‘Panchasutras’ i.e. Regular meetings; Regular savings; Regular inter-loaning; Timely repayment; and Up-to-date books of accounts;

• Qualified as per grading norms fixed by NABARD. As and when the federations of the SHGs come to existence, the grading exercise may be done by the Federations to support the banks.

• The existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of 3 months.

7.2.2 Loan Application: It is advised that all banks may use the Common Loan Application Forms recommended by Indian Bank’s Association (IBA) for extending credit facility to SHGs.

7.2.3 Loan amount: Emphasis is laid on the multiple doses of assistance under DAY- NRLM. This would mean assisting an SHG over a period of time, through repeat doses of credit, to enable them to access higher amounts of credit for taking up sustainable livelihoods and improve on the quality of life.

SHGs may avail either Term Loan (TL) or a Cash Credit Limit (CCL) loan or both based on the need. In case of need, additional loan may be sanctioned even though the previous loan is outstanding, based on the repayment behavior and performance of the SHG.

The amount of credit under different facilities are as follows:

Cash Credit Limit (CCL): In case of CCL, banks are advised to sanction minimum loan of ₹ 6 lakh to each eligible SHGs for a period of 3 years with a yearly drawing power (DP). The drawing power may be enhanced annually based on the repayment performance of the SHG. The drawing power may be calculated as follows:

• DP for First Year: 6 times of the existing corpus or minimum of ₹1 lakh, whichever is higher

• DP for Second Year: 8 times of the corpus at the time review/ enhancement or minimum of ₹2 lakh, whichever is higher

• DP for Third Year: Minimum of ₹6 lakh based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit history.

• DP for Fourth Year onwards: Above ₹6 lakh, based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit History.

Term Loan: In case of Term Loan, banks are advised to sanction loan amount in doses as mentioned below:

• First Dose: 6 times of the existing corpus or minimum of ₹1 lakh, whichever is higher

• Second Dose: 8 times of the existing corpus or minimum of ₹2 lakh, whichever is higher

• Third Dose: Minimum of ₹6 lakh, based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit history.

• Fourth Dose onwards: Above ₹6 lakh, based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit History.

Banks are advised take necessary measures to ensure that eligible SHGs are provided with repeat loans. Banks are advised to coordinate with DAY-NRLM to institutionalize a mechanism for online submission of loan application from SHGs for tracking and timely disposal of application.

(Corpus is inclusive of revolving funds, if any, received by that SHG, its own savings, interest earning by SHG from on-lending to its members, income from other sources, and funds from other sources in case of promotion by other institutes/NGOs.)

7.3 Purpose of loan and repayment:

7.3.1 The loan amount would be distributed among members based on the Micro Credit Plan (MCP) prepared by the SHGs. The loans may be used by members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihoods by the individual members within the SHGs or to finance any viable common activity started by the SHGs.

7.3.2 In order to facilitate use of loans for augmenting livelihoods of SHG members, it is advised that at least 50% of loans above ₹2 lakh, 75% of loans above ₹4 lakh and at least 85% of loans above ₹6 lakh be used primarily for income generating productive purposes. Micro Credit Plan (MCP) prepared by SHGs would form the basis for determining the purpose and usage of loans.

7.3.3 Repayment schedule for Term Loans may be as follows:

• The First dose of loan may be repaid in 24-36 months in monthly/Quarterly Instalments.

• The Second dose of loan may be repaid in 36-48 months in monthly/Quarterly instalments.

• The Third dose of loan may be repaid in 48-60 months based on the cash flow in monthly/Quarterly instalments.

• The loan from Fourth dose onwards may be repaid between 60-84 months based on the cash flow in monthly/ quarterly installments.

7.3.4 All facilities sanctioned under DAY- NRLM would be governed by the Asset Classification norms issued by Reserve Bank of India from time to time.

7.4. Security and Margin:

No collateral and no margin would be charged up to ₹10.00 lakh limit to the SHGs. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans

7.5. Dealing with Defaulters:

It is desirable that willful defaulters should not be financed under DAY-NRLM. In case willful defaulters are members of a group, they might be allowed to benefit from the thrift and credit activities of the group including the corpus built up with the assistance of Revolving Fund. But at the stage of accessing bank loan by SHG for financing economic activities by its members, the willful defaulters should not have the benefit of such bank loan until the outstanding loans are repaid. Willful defaulters of the group should not get benefits under the DAY-NRLM Scheme and the group may be financed excluding such defaulters while documenting the loan. However, banks should not deny loan to entire SHG on the pretext that spouse or other family members of individual members of SHG being a defaulter with the bank. Further, non-willful defaulters should not be debarred from receiving the loan. In case default is due to genuine reasons, banks may follow the norms suggested for restructuring the account with revised repayment schedule.

8 Credit Target Planning

8.1 Based on the Potential Linked Plan/State Focus Paper prepared by NABARD, SLBC sub-committee on SHG Bank Linkage may arrive at the district-wise, block-wise and branch-wise credit plan. The sub- committee should consider the existing SHGs, New SHGs proposed, and number of SHGs eligible for fresh and repeat loans as suggested by the SRLMs to arrive at the credit targets for the states. The targets so decided should be approved in the SLBC and reviewed and monitored periodically for effective implementation.

8.2 The district-wise credit plans should be communicated to the DCC. The Block- wise/Cluster-wise targets are to be communicated to the bank branches through the Controllers.

9 Post credit follow- up

9.1 Loan pass books or statement of accounts in regional languages may be issued to the SHGs which may contain all the details of the loans disbursed to them and the terms and conditions applicable to the loan sanctioned. The passbook should be updated with every transaction made by the SHGs. At the time of documentation and disbursement of loan, it is advisable to clearly explain the terms and conditions as part of financial literacy.

9.2 Bank branches may observe one fixed day in a fortnight to enable the staff to go to the field and attend the meetings of the SHGs and Federations to observe the operations of the SHGs and keep a track of the regularity in the SHGs meetings and performance.

10 Repayment:

Prompt repayment of the loans is necessary to ensure the success of the programme. Banks shall take all possible measures, i.e. personal contact, organization of joint recovery camps with District Mission Management Units (DPMUs) /District Rural Development Agency(DRDAs) to ensure the recovery of loans. Keeping in view, the importance of loan recovery, banks should prepare a list of defaulting SHGs under DAY-NRLM every month and furnish the list in the BLBC, DCC meetings. This would ensure that DAY-NRLM staff at the district/ block level would assist the bankers in initiating the repayment

11 Supervision and monitoring of the Scheme

Banks may set up cells for Self Help Groups at respective Regional/Zonal offices of banks. These cells should periodically monitor and review the flow of credit to the SHGs, ensure the implementation of the guidelines to the scheme, collect data from the branches and make available consolidated data to the Head office and the DAY-NRLM units at the districts/ blocks. The cell should also discuss this consolidated data in the SLBC, BLBC and DCC meetings regularly to maintain the effective communication with the state staff and all banks.

11.1 State Level Bankers’ Committee: SLBCs shall constitute a sub-committee on SHG bank linkage. The sub-committee should consist of members from all banks operating in the State, RBI, NABARD, CEO of SRLM, representatives of State Rural Development Department, Secretary-Institutional Finance and Representatives of Development Departments etc. The sub- committee shall discuss a specific agenda of review, implementation and monitoring of the SHG-Bank linkage and the issues/ constraints in achievement of the credit target. The decisions of SLBCs should be derived from the analysis of the reports of the sub-committee.

11.2 District Coordination Committee: The DCC shall regularly monitor the flow of credit to SHGs at the district level and resolve issues that constrain the flow of credit to the SHGs at district level. This committee should have participation of LDMs, AGM of NABARD, district coordinators of the banks and DPMU staff representing DAY-NRLM and office bearers of SHG federations

11.3 Block level Bankers Committee: The BLBC shall take up issues of SHG bank linkage at the block level. In this Committee, the SHGs/ Federations of the SHGs should be included as members to raise their voice in the forum. Branch wise status of SHG credit shall be monitored at the BLBC.

11.4 Reporting to Lead District Managers: The branches may furnish the progress report and the delinquency report achieved under various activities of DAY-NRLM in the format at Annex–IV and Annex-V to the LDM every month for onward submission to Special Steering Committee/sub-committee constituted by SLBC.

11.5 Reporting to RBI: Banks may give a state-wise consolidated report on the progress made on DAY-NRLM to RBI/NABARD at quarterly intervals. The data may be submitted within a month from the end of the concerned quarter.

11.6 LBR returns: Existing procedure of submitting LBR returns to be continued duly furnishing the correct code

12 Financial Literacy: Financial Literacy is one of the important strategies to spread awareness on financial behavior and keep households informed about various financial products and services. DAY-NRLM has trained and deployed a large number of cadre called ‘Financial Literacy Community Resource Persons (FL-CRPs)’ to carry out financial literacy camps at village level. Financial Literacy Centers (FLC) established by various banks may coordinate with respective SRLMs and utilize the services of FL-CRPs to conduct village camps on Financial Literacy.

13 Data Sharing:

13.1 Data sharing on a mutually agreed format / interval may be provided to DAY-NRLM or State Rural Livelihood Missions (SRLMs) for initiating various strategies including recovery etc.

The financing banks are advised to regularly share data on loans to SHGs with the DAY- NRLM or SRLMs, directly from the CBS platform.

13.2 Banks should share data of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) with DAY-NRLM on agreed formats to facilitate higher enrollment and claim settlement under the mentioned schemes.

13.3 Banks to share data of all SHG transactions being done at Business Correspondents points using Dual Authentication technology introduced by banks on a mutually agreed format/interval only after obtaining consent of the customer. However, the banks should ensure preservation and protection of the security and confidentiality of customer information in the custody or possession of BC.

14 DAY-NRLM support to the bankers:

14.1 SRLM would develop strategic partnerships with major banks at various levels. It would invest in creating enabling conditions for both the banks and the poor for a mutually rewarding relationship.

14.2 SRLM would assist the SHGs through imparting financial Literacy, extending counselling services on savings, credit, insurance, pension and training on Micro- Investment Planning embedded in capacity building.

14.3 SRLMs would extend support to banks for improving quality of banking services to poor clients including follow-up for recovery of over dues if any, by positioning customer relationship managers (Bank Mitra/ Sakhi) with every bank branch involved in financing of SHGs.

14.4 Leveraging IT mobile technologies and institutions of poor, youth or SHG member as business facilitators and business correspondents.

14.5 Community Based Repayment mechanism (CBRM): One exclusive sub – committee for SHG Bank Linkage may be formed at village/cluster/ block level which would provide support to the banks in ensuring proper utilization of loan amount, recovery etc. The bank linkage sub – committee members from each village level federation along with project staff would meet once in a month under the chairmanship of the Branch Manager in the branch premises with the agenda items relating to bank linkage.

Annex I

Key Features of DAY-NRLM

1. Universal Social Mobilization: To begin with, DAY-NRLM would ensure that at least one member from each identified rural poor household, preferably a woman, is brought under the Self Help Group (SHG) network in a time bound manner. Subsequently, both women and men would be organized for addressing livelihood issues i.e. farmers organizations, milk producers’ cooperatives, weavers associations, etc. All these institutions are inclusive and no poor would be left out of them. DAY-NRLM would ensure adequate coverage of vulnerable sections of the society such that 50% of the beneficiaries are SC/STs, 15% are minorities and 3% are persons with disability, while keeping in view the ultimate target of 100% coverage of all households under the automatically included criteria and households with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC).

2. Participatory Identification of poor (PIP): The experience from SGSY suggests that the current BPL list has large inclusion and exclusion errors. To widen the target groups beyond the BPL list and to include all the needy poor identified as households with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC). DAY- NRLM would also undertake community-based process i.e. participation of the poor in the process of identifying the target group. Participatory process based on sound methodology and tools (social mapping and well-being categorization, deprivation indicators) and also locally understood and accepted criterion ensures local consensus that inadvertently reduces the inclusion and exclusion errors and enables formation of the groups on the basis of mutual affinity. Over the years, the participatory method of identifying the poor have been developed and applied successfully in the states like AP, Kerala, Tamil Nadu and Odisha.

The households identified with at least one deprivation criteria as per SECC along with households identified through the P.I.P process would be accepted as DAY-NRLM target group and would be eligible for all the benefits under the programme. The list finalized after PIP process would be vetted by the Gram Sabha and approved by the Gram Panchayat.

Till the PIP process is undertaken by the State in a particular district/Block, the rural households with at least one deprivation criteria as per SECC list would be targeted under DAY-NRLM. As already provided in the Framework for implementation of DAY-NRLM, up to 30% of the total membership of the SHGs may be from among the population marginally above the poverty line, subject to the approval of other members of the group. This 30% also includes the poor households whose name does not figure in the SECC list but are as poor as those included in SECC list.

3. Promotion of Institutions of the poor: Strong institutions of the poor such as SHGs and their village level and higher-level federations are necessary to provide space, voice and resources for the poor and for reducing their dependence on external agencies. They empower them and also act as instruments of knowledge and technology dissemination, and hubs of production, collectivization and commerce. DAY-NRLM, therefore, would focus on setting up these institutions at various levels. In addition, DAY- NRLM would promote specialized institutions like Livelihoods collectives, producers’ cooperative/companies for livelihoods promotion through deriving economies of scale, backward and forward linkages, and access to information, credit, technology, markets etc.

The Livelihoods collectives would enable the poor to optimize their limited resource.

4. Strengthening all existing SHGs and federations of the poor. There are existing institutions of the poor women formed by Government efforts and efforts of NGOs. DAY- NRLM would strengthen all existing institutions of the poor in a partnership mode. The self-help promoting institutions both in the Government and in the NGO sector would promote social accountability practices to introduce greater transparency. This would be in addition to the mechanisms that would be evolved by SRLMs and state governments. The learning from one another underpins the key processes of learning in DAY-NRLM.

5. Emphasis on Training, Capacity building and skill building: DAY-NRLM would ensure that the poor are provided with the requisite skills for managing their institutions, linking up with markets, managing their existing livelihoods, enhancing their credit absorption capacity and credit worthiness, etc. A multi-pronged approach is envisaged for continuous capacity building of the targeted families, SHGs, their federations, government functionaries, bankers, NGOs and other key stakeholders. Particular focus would be on developing and engaging community professionals and community resource persons for capacity building of SHGs and their federations and other collectives. DAY- NRLM would make extensive use of ICT to make knowledge dissemination and capacity building more effective.

6. Revolving Fund and Community investment support Fund (C.I.F): A Revolving Fund would be provided to eligible SHGs as an incentive to inculcate the habit of thrift and accumulate their own funds towards meeting their credit needs in the long-run and immediate consumption needs in the short-run. The C.I.F would be a corpus and used for meeting the members’ credit needs directly and as catalytic capital for leveraging repeat bank finance. The C.I.F would be routed to the SHGs through the Federations. The key to coming out of poverty is continuous and easy access to finance, at reasonable rates, till they accumulate their own funds in large measure.

7. Universal Financial Inclusion: DAY-NRLM would work towards achieving universal financial inclusion, beyond basic banking services to all the poor households, SHGs and their federations. DAY-NRLM would work on both demand and supply side of Financial Inclusion. On the demand side, it would promote financial literacy among the poor and provides catalytic capital to the SHGs and their federations. On the supply side, it would coordinate with the financial sector and encourage use of Information, Communication & Technology (ICT) based financial technologies, business correspondents and community facilitators like ‘Bank Mitras’. It would also work towards universal coverage of rural poor against loss of life, health and assets. Further, it would work on remittances, especially in areas where migration is endemic.

8. Provision of Interest Subvention: The rural poor need credit at low rate of interest and in multiple doses to make their ventures economically viable. In order to ensure affordable credit, DAY-NRLM has a provision for subvention on interest rate above 7% per annum for all eligible SHGs, who have availed loans from mainstream financial institutions.

9. Funding Pattern: DAY-NRLM is a Centrally Sponsored Scheme and the financing of the programme would be shared between the Centre and the States in the ratio of 60:40 (90:10 in case of North Eastern States including Sikkim; completely from the Centre in case of UTs). The Central allocation earmarked for the States would broadly be distributed in relation to the incidence of poverty in the States.

10. Phased Implementation: Social capital of the poor consists of the institutions of the poor, their leaders, community professionals and more importantly community resource persons (poor women whose lives have been transformed through the support of their institutions). Building up social capital takes some time in the initial years, but it multiplies rapidly after some time. If the social capital of the poor does not play the lead role in DAY-NRLM, then it would not be a people’s programme. Further, it is important to ensure that the quality and effectiveness of the interventions is not diluted. Therefore, a phased implementation approach is adopted in DAY-NRLM. DAY-NRLM would reach all districts by the end of 12th Five-year Plan.

11. Intensive blocks. The blocks that are taken up for implementation of DAY-NRLM, ‘intensive blocks’, would have access to a full complement of trained professional staff and cover a whole range of activities of universal and intense social and financial inclusion, livelihoods, partnerships etc. However, in the remaining blocks or non-intensive blocks, the activities may be limited in scope and intensity.

12. Rural Self Employment Training Institutes (RSETIs). RSETI concept is built on the model pioneered by Rural Development Self Employment Institute (RUDSETI) – a collaborative partnership between SDME Trust and Canara Bank. The model envisages transforming unemployed youth into confident self- employed entrepreneurs through a short duration experiential learning programme followed by systematic long duration hand holding support. The need-based training builds entrepreneurship qualities, improves self-confidence, reduces risk of failure and develops the trainees into change agents. Banks are fully involved in selection, training and post training follow up stages. The needs of the poor articulated through the institutions of the poor would guide RSETIs in preparing the participants/trainees in their pursuits of self- employment and enterprises. DAY-NRLM would encourage public sector banks to set up RSETIs in all districts of the country.

Annex II

Interest Subvention Scheme for Women SHGs

Interest subvention scheme on Credit to Women SHGs in rural areas would be available in following two ways:

I. Interest subvention scheme on credit to women SHGs in 250 districts:

i. All women SHGs would be eligible for Interest subvention on credit up to ₹3 lakh at subvented rate of 7% per annum. SHGs availing capital subsidy under SGSY in their existing credit outstanding would not be eligible for benefit under this scheme.

ii. The commercial banks (Public Sector, Private Sector and Small Finance Banks) would lend to all the women SHGs in rural areas at the rate of 7% up to an aggregated loan amount of ₹300,000/- in the 250 districts as provided in Annexure III. For the women SHGs in these districts an additional interest subvention of 3% is also available on prompt repayment, reducing the effective rate of interest to 4%.

iii. All commercial banks (Public Sector, Private Sector and Small Finance Banks) would be subvented to the extent of difference between the Weighted Average Interest Charged (WAIC as specified by Department of Financial Services, Ministry of Finance) and 7% subject to the maximum limit of 5.5%. This subvention would be available to all the banks on the condition that they make SHG credit available at 7% p.a. in the 250 districts.

iv. Further, the SHGs would be provided with an additional 3% subvention on the prompt repayment of loans. For the purpose of Interest Subvention of additional 3% on prompt repayment, an SHG account would be considered prompt payee if it satisfies the following criterion.

a. For Cash Credit Limit:

1. Outstanding balance shall not have remained in excess of the limit/drawing power continuously for more than 30 days.

2. There should be regular credit and debits in the accounts. In any case there shall be at least one customer induced credit during a month.

3. Customer induced credit should be sufficient to cover the interest debited during the month.

b. For the Term loans: A term loan account where all of the interest payments and/or instalments of principal were paid within 30 days of the due date during the tenure of the loan, would be considered as an account having prompt payment.

v. The banks should credit the amount of 3% interest subvention to the eligible prompt payee SHG loan accounts and seek the reimbursement after the end of reporting quarter.

vi. The funding for the scheme would be met out of Central Allocation under DAY- NRLM

vii. The interest subvention scheme shall be implemented through a Nodal Bank selected by the Ministry of Rural Development (MoRD). The Nodal Bank would operationalize the scheme through a web based platform, as advised by MoRD. The nodal bank would be notified by MoRD.

viii. In order to avail the Interest Subvention on credit extended to the SHGs @ 7% (regular subvention), all Public Sector Banks, Private Sector Banks and Small Finance Banks are required to upload the SHG loan account information on the Nodal Bank’s portal as per the required technical specification. The banks should also submit the claims for 3% additional subvention on the same portal.

ix. Public Sector Banks, Private Sector Banks and Small Finance Banks must submit the regular claims (difference between WAIC or lending rate and 7%) and additional claims (@ 3% on prompt repayment) on a quarterly basis as on June 30, September 30, December 31, and March 31 by last week of the subsequent month.

x. The banks are required to submit claim certificate on quarterly basis to the nodal bank. The claims submitted by any bank should be accompanied by claim certificate (in original) certifying the claims for subvention as true and correct (Annexure-VI & VII). The claims of any bank for the quarter ending March would be settled by MoRD only on receipt of the Statutory Auditor’s certificate for the complete Financial Year from the bank.

xi. Any remaining claim pertaining to the disbursements made during the year and not included during the year, may be consolidated separately and marked as an ‘Additional Claim’ and submitted to Nodal Bank by banks latest by June every year, duly audited by Statutory Auditor’s certifying the correctness. No claims from banks pertaining to interest subvention for Financial Year are admissible after June 30.

xii. Any corrections in claims by banks shall be adjusted from later claims based on auditor’s certificate. The corrections must be made on the Nodal Bank’s portal accordingly.

II. Interest subvention scheme for Category II Districts (Other than 250 districts).

In the Category II districts, banks may charge the SHGs as per their respective lending norms and the difference between the lending rates and 7% subject to a maximum limit of 5.5% would be subvented directly in the loan accounts of the SHGs by the SRLMs. The funding for this subvention would be provided to the State Rural Livelihoods Missions (SRLMs) from the allocation for DAY- NRLM. In pursuance of the above, the salient features and the operational guidelines in respect of the interest subvention for the category II districts, are as follows:

(A) Role of the Banks:

All banks are required to furnish the details of the credit disbursement and credit outstanding of the SHGs across all districts in the desired format as suggested by the MoRD, directly from the CBS platform, to the Ministry of Rural Development (through FTP or interface) and to the SRLMs. The information should be provided on a monthly basis to facilitate the calculation and disbursement of the Interest Subvention amount to SHGs.

(B) Role of the State Governments:

i. All women SHGs from rural areas under DAY- NRLM would be eligible for interest subvention on credit upto ₹3 lakh at the rate of 7% per annum on prompt repayment.

ii. This scheme would be implemented by the State Rural Livelihood Missions (SRLMs). SRLMs would provide interest subvention to the eligible SHGs who have accessed loan from commercial and cooperative banks. The funding for this subvention would be met out of the Central Allocation and State Contribution as per the norms of Government of India.

iii. The SHGs would be subvented to the extent of difference between the lending rate of the banks and 7% subject to a maximum limit of 5.5% by the SRLMs, directly on a monthly/quarterly basis. An e-transfer of the subvention amount would be made by the SRLM to the loan accounts of the SHGs who have repaid promptly. In case the loan account is already closed, or e-transfer to the loan account is not successful due to any reason, the subvention amount may be transferred to the corresponding savings account of the concerned SHGs.

iv. For the purpose of the Interest Subvention, an account would be considered as prompt payee if it satisfies the following criterion:

a. For Cash Credit Limit:

1. Outstanding balance shall not have remained in excess of the limit/drawing power continuously for more than 30 days

2. There should be regular credit and debits in the accounts. In any case there shall be at least one customer induced credit during a month

3. Customer induced credit should be sufficient to cover the interest debited during the month.

b. For the Term loans: A term loan account where all of the interest payments and/or instalments of principal were paid within 30 days of the due date during the tenure of the loan, would be considered as an account having prompt payment

v. Women SHGs who have availed capital subsidy under SGSY in their existing loans, would not be eligible for benefit of Interest Subvention for their subsisting loan under this scheme.

vi. SRLMs should submit Quarterly Utilization Certificate indicating subvention amounts transferred to the Loan accounts of the eligible SHGs.

III. The States with state specific interest subvention schemes are advised to harmonize their guidelines with the Central scheme.

Annexure-III

List of 250 eligible Districts for the Interest Subvention on the loan at 7% and additional interest Subvention of 3% on the prompt repayment

Appendix