Abstract:
Financial Inclusion in India has always been a priority for the Indian banking sector.
Numerous schemes like Lead Bank Scheme, opening branches in unbanked areas,
Pradhan Mantri Jan Dhan Yojana and others have been launched to achieve the
objective of universal banking and provide everyone (Sarvodaya), till the last mile
(Antyodaya), with formal credit facilities. The biggest bottleneck in realising this
objective is the want of collaterals for loans. The poor rural population do not have
enough land and other assets to mortgage them for formal credit. The Self-Help Group
Bank Linkage Programme(SHGBLP) aims to provide loans to the Self-Help Groups
(SHG) without collateral requirements. Those who are not eligible for formal credit can
avail the same. The government along with NABARD and RBI is promoting this
mechanism of credit flow. However, there exist wide regional disparity when it comes
to the promotion of such schemes. One of the reasons for such disparity is the high
default rate in the states like Uttar Pradesh. The high default rate by the SHGs inhibits
the growth of SHGBLP in the state. This study aims to study the reasons for such
defaults and its effect on the SHGBLP. The policy recommendations that flow from
this study tries to eliminate these reasons by changing the design and strategy of the
programme suitably.
