Self Help Group (SHG) is a small, economically homogeneous affinity group of 10-20 rural poor people, voluntarily formed to save and mutually agreed to contribute to a common fund to be lent to its members for meeting their productive and emergent credit needs as per group decision.

Target Group

• The ideal size of an SHG is 10-20 members. However, in difficult areas like forest, hills or desert with scattered and scarce population and in case of Govt. Sponsored schemes like minor irrigation, or when all the members are disabled persons, this number may vary from 5 – 20. Such difficult areas have to be identified by the appropriate authority (State level SGSY Committee).
• Only one person from one family can become a member of an SHG. Normally the group consists of only men or only women. A mixed group is not preferred for Bank linkage. Women’s groups are generally found as a better performer.
• Members should have the same social and financial background to ensure easier and free interaction among them.

• SHG should be in existence for at least 6 months
• A minimum Savings/Corpus of Rs 5,000
• Acceptable level of financial and administrative discipline in running of the SHG

Credit limit will be given in the form of cash credit/ term loan depending upon the nature of activity/ purpose to be undertaken by the group.

Linking of SHGS to Bank

Opening a Saving Bank Account.

Official instructions: The Reserve Bank of India has issued instructions permitting banks to open SB A/c of registered or unregistered SHGs. (RBI Circular given as Annexure to this book). SB A/c in the name of an SHG can be opened after obtaining from the group the following documents:

·       Resolution from the SHG: The SHG has to pass a resolution in the group meeting, signed by all members, indicating their decision to open SB A/c with the bank. This resolution should be filed with the bank.

·       Authorization from the SHG: The SHG should authorize at least three members, any two of whom, to jointly operate upon their account. The resolution along with the filled in application form duly introduced by the promoter may be filed with the bank branch.

The following documents are required to be obtained / verified from the SHG before extending credit:
KYC Documents

• Constitution documents which can be used as KYC are
  • Recommendation letter/Sanction letter/ Loan Recommendation letter from Block Development Officer (BDO) or a Class I Gazetted officer working in the same department
  • Inter-se Agreement (either registered or unregistered) executed by all members of the SHG communicating their decision to open a Savings Account with the bank and identifying two or three members to jointly operate the account
     
• Identity Proof of the SHG
  • Letter of Certification from empanelled SHPI certified by NABARD Official empowered at the village or taluka level.
  • Recommendation letter/Sanction letter/ Loan Recommendation letter from Block Development Officer (BDO) or a Class I Gazetted officer working in the same department; or
  • SHG Registration certificate (if registered); or
  • Copy of passbook of existing account with a public sector bank; or scheduled commercial bank
  • Original letter of introduction from a bank official of a public sector bank; or
  • Copy of passbook /statement of an existing account with a Regional Rural Bank/ Co-operative Bank/Systematically Important NBFCs/ Credit Co-operative Society along with a letter of introduction from SHPI/the Village Sarpanch/ Village Administrative Office (VAO)
  • KYC Certification by duly empanelled Business Correspondent of the Bank.
  • In case of SHGs sourced under the Direct Sourcing Mode who do not have an existing bank account, a letter of introduction from the Village Sarpanch / Village Administrative Office (VAO) in rural locations would be accepted.
     
• Address Proof of the SHG
  • Same as Constitution Documents; or
  • Same as Identity Documents if it contains the address.
  • Photographs of Authorized Signatories
     
• Identity and Address Proofs of Authorized Signatories
  • Voter ID card
  • Bank pass book (bearing photograph of client) issued by SBI and its subsidiaries or Nationalized Banks where account has been opened at least 3 months prior, can be accepted along with an account opening cheque drawn on the same account.
  • Sarpanch Letter
     
• Documents required other than KYC
  • Duly filled Facility Application Form
  • Loan Authorisation Letter
  • Direct Debit Form/ECS Mandate/PDC Declaration
  • Inter Se Agreement executed by all members of SHGs
  • SHPI Recommendation Letter
  • Repayment track record if the SHG has credit linkage with any other bank or financial institution