The Union Ministry of Rural Development (MoRD) has recently mandated state governments to monitor Non Performing Assets (NPAs) at the district level. The objective is to initiate corrective measures for the recovery of overdue/outstanding dues from Self-Help Groups (SHGs). The discussion on this issue was initiated in the review meeting of the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission.
An NPA is a loan or an advance where the principal or interest payment has been overdue for a duration of 90 days.
Overview of Deendayal Antyodaya Yojana – National Livelihoods Mission
The Deendayal Antyodaya Yojana – National Livelihoods Mission was launched in 2011 by the Ministry of Rural Development, Government of India. The mission was set up with the intention to cover 7 Crore rural poor households across 600 districts, 6000 blocks, 2.5 Lakh Gram Panchayats and 6 Lakh villages in the country. Spanning over a period of 8-10 years, the mission would provide support through SHGs and federated institutions, helping them in the formation of livelihood collectives.
The primary goal of the mission is to establish efficient institutional platforms for the rural poor, which will enable them to increase their household income through sustainable livelihood enhancements and improved access to financial services.
NPA Status of SHG Loans and State-wise Distribution
Approximately Rs. 91,130 crore were handed out as loans to about 54.57 lakh SHGs across India until the end of March 2020. From this total outstanding bank loan, around 2.37% or Rs. 2,168 crore turned out to be NPAs. A significant increase has been observed in the proportion of NPAs in bank loans given to SHGs over the past decade, escalating from 2.90% in 2008 to 6.12% in 2018.
States such as Uttar Pradesh reported that 36.02% of the loans taken by their 71,907 SHGs were NPAs by the end of March 2020. This figure stood against the 22.16% reported in 2018-19. In Arunachal Pradesh, even though the number of SHGs is just 209, the NPA proportion alarmingly stood at 43%.
MoRD’s Directions and Reasons for NPAs
In an attempt to control the increasing NPA stats, the State Rural Livelihood Missions (SRLMs) have been directed by the MoRD to closely monitor the NPAs on a district-wise basis. Immediate corrective measures are mandated in case of detection of NPAs or overdue amounts. Successful implementation of this mechanism requires it to be institutionalized in all bank branches.
A research study by the National Institute of Rural Development and Panchayati Raj (NIRDPR) in 2019 provided insights into the reasons for non-payment of loans by SHGs. The key factors included poor economic conditions, lack of training, expenses towards social ceremonies, medical emergencies, and expectations of loan waiver from the government. Banks also lacked their expected input in terms of assistance, account management, supervision, and follow-up.
Government Initiatives to Promote SHGs
To further support SHGs, the central government has initiated various programs such as the Agriculture Infrastructure Fund, PM Formalization of Micro Food Processing Enterprises (PM FME) Scheme, Pradhan Mantri Matsya Sampada Yojana (PMMSY), Ambedkar Hastshilp Vikas Yojana (AHVY), North East Rural Livelihood Project, and the Economic Stimulus-III initiative.
An Overview of National Institute of Rural Development and Panchayati Raj
The NIRDPR is an autonomous organisation under the Union Ministry of Rural Development. Recognised as a UN-ESCAP Centre of Excellence, this national centre champions excellence in rural development and Panchayati Raj. Located in Hyderabad, Telangana, the institute participates in training, research, and consultancy to build the capacities of rural development functionaries, elected representatives of Panchayati Raj Institutions, bankers, NGOs and other stakeholders.
Suggestions and Way Forward
To ensure loan repayment, it is essential that SHGs are trained and provided with market linkages for their products/services. The government should club group health and life insurance with loans at low costs, as members often spend significant portions of the loans on medical emergencies and social events. A proper grading mechanism for assessing SHGs before issuing loans is crucial and constant monitoring of said loans is imperative.
SHG loans are key economic drivers and despite the concern over NPAs, government support for SHGs should be ongoing. Especially post-lockdown, there is an urgent need for economic revival and reconstruction – an area where SHGs can play a significant role. Moreover, women members of SHGs across India have contributed significantly to curbing the spread of Covid-19, demonstrating the critical role these groups play in society.
