BharatNotes Introduction
Financial inclusion — ensuring that every individual and enterprise has access to useful and affordable financial products and services — is a foundational development objective. For a country where over 40 crore people had no bank account as recently as 2014, the challenge has been enormous. Microfinance and the Self-Help Group (SHG) movement represent the supply-side response: channelling small amounts of credit, savings, and insurance to the rural poor, particularly women, without collateral requirements.
For UPSC GS3, this topic falls under resource mobilisation, inclusive growth, and rural development. The AP Microfinance Crisis (2010), the Malegam Committee (2011), the JAM Trinity, and PMJDY are frequently examined.
What is Microfinance?
Microfinance refers to the provision of small financial services — credit, savings, insurance, remittances — to low-income households and micro-enterprises that lack access to formal banking channels.
Defining Characteristics
| Feature | Detail |
|---|---|
| Loan size | Typically small (under ₹1 lakh per loan cycle; RBI defines microfinance loan as to households with annual income up to ₹3 lakh) |
| Collateral | None required — group guarantee or social collateral used |
| Borrowers | Women, rural poor, micro-entrepreneurs, agricultural laborers |
| Delivery model | Group-based (Joint Liability Groups or SHGs) or individual |
| Repayment discipline | High — social pressure within groups enforces repayment |
Global Origin: Muhammad Yunus and Grameen Bank
- Muhammad Yunus founded the Grameen Bank in Bangladesh in 1983 after piloting microcredit lending from 1976.
- Grameen Bank provided collateral-free small loans, predominantly to poor women in rural Bangladesh, through group-based lending.
- Yunus and Grameen Bank jointly received the Nobel Peace Prize in 2006 "for their efforts to create economic and social development from below."
- By the time of the Nobel award, Grameen Bank had over 7 million borrowers; more than 95% were women.
- The Grameen model inspired microfinance institutions (MFIs) in over 100 countries, including India.
Grameen Model vs. SHG Model
| Dimension | Grameen Bank Model | SHG-Bank Linkage Model |
|---|---|---|
| Group size | 5-member Joint Liability Group (JLG) | 10–20 members per SHG |
| Credit source | Directly from MFI/bank to individual via group | SHG saves collectively → SHG receives bulk credit from bank |
| Savings | Members save individually (small amounts) | Group savings are pooled — mandatory internal lending |
| Internal lending | Not applicable | SHG lends internally to members before bank linkage |
| Intermediary | MFI (NBFC-MFI or bank) | SHG itself is the intermediary; NABARD facilitates |
| External support | MFI field officers | NGO/bank facilitators (Bank Mitra, Business Correspondents) |
| Predominant in | Urban/peri-urban India (NBFC-MFIs) | Rural India (DAY-NRLM, NABARD programme) |
| Social capital | Moderate | Very high — SHGs develop governance and leadership skills |
MFI Structure in India
India has a pluralistic MFI sector with multiple types of entities:
| Entity Type | Regulator | Key Feature |
|---|---|---|
| NBFC-MFIs | RBI | Dominant form; subject to specific NBFC-MFI master directions |
| Section 8 Companies (Not-for-profit MFIs) | MCA + RBI | Mission-driven; can accept donations; examples: SEWA, Bandhan (before becoming bank) |
| Cooperative MFIs | State Registrar of Cooperatives / NABARD | Governed by state cooperative laws; limited geographic reach |
| Small Finance Banks (SFBs) | RBI | Evolved from MFIs (e.g., Ujjivan, Jana, Equitas); serve MFI borrowers at scale |
| Business Correspondents (BCs) | RBI (through banks) | Last-mile agents; do not bear credit risk directly |
MFIN (Microfinance Institutions Network):
- Industry association and Self-Regulatory Organisation (SRO) for NBFC-MFIs
- Recognised by RBI as India's first SRO for NBFC-MFIs in 2014
- Introduced ₹2 lakh cap on total microfinance exposure per borrower (November 2024) and three-lender limit per borrower
- Publishes quarterly Micrometer reports on sector performance
RBI Regulatory Framework for Microfinance
Evolution of Regulation
| Phase | Period | Key Development |
|---|---|---|
| Pre-regulation | Before 2010 | MFIs largely unregulated; rapid expansion in AP, Karnataka |
| AP Crisis & Response | 2010–2011 | AP Ordinance 2010; RBI constitutes Malegam Committee (October 2010) |
| Post-Malegam | 2011–2021 | NBFC-MFI category created; income and interest caps introduced |
| Harmonised framework | 2022 onwards | RBI's unified microfinance guidelines — single framework for all regulated lenders |
Malegam Committee, 2011
The RBI constituted the Sub-Committee of the Central Board of Directors on Micro Finance (popularly known as the Malegam Committee after its chairman Y.H. Malegam) on 15 October 2010 in response to the AP crisis. Report released: 19 January 2011.
Key Recommendations (mostly accepted by RBI):
| Recommendation | Detail |
|---|---|
| Separate NBFC-MFI category | Create a distinct, RBI-regulated category of NBFCs focused on microfinance |
| Income ceiling | Household annual income limit for borrower eligibility (rural and urban) |
| Interest rate cap | Maximum 24% interest on individual loans; margin cap of 10% (large MFIs) / 12% (small MFIs) |
| Loan size limit | Per-borrower loan limit to prevent over-indebtedness |
| Minimum net owned funds | ₹15 crore minimum capital for NBFC-MFIs |
| Two-lender rule | Borrower should not have loans from more than two MFIs simultaneously |
Current RBI Framework (Unified Guidelines, 2022)
| Parameter | Current Rule |
|---|---|
| Eligible borrower | Household with annual income up to ₹3 lakh (revised from earlier rural ₹1.2 lakh / urban ₹2 lakh) |
| Interest rate cap | No hard cap — RBI removed margin caps; lenders must disclose rate-setting methodology; rates must not be "usurious" |
| Instalment-to-income ratio | Monthly loan repayment instalments must not exceed 50% of monthly household income |
| Transparency | Maximum interest rate must be displayed at branch and website; borrowers must receive loan card with key terms |
| Lender limits | MFIN SRO norm: maximum 3 lenders per borrower, ₹2 lakh total MFI exposure cap |
| Fair Practices Code | Mandatory; prohibits coercive recovery; requires grievance redressal |
SHG-Bank Linkage Programme (SBLP)
Origins
- Launched: 1992 by NABARD (pilot programme with 500 SHGs)
- Expanded under: DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihoods Mission), Ministry of Rural Development
- Objective: Link informal self-help groups to formal banking system; provide credit to rural poor (especially women) without collateral
Three Models of SBLP
| Model | Description | Key Actor |
|---|---|---|
| Model I | SHG directly opens savings account with bank and receives credit | Bank is direct lender |
| Model II | SHG formed and nurtured by an NGO; bank lends directly to SHG | NGO as facilitator |
| Model III | SHG formed by NGO or MFI; MFI borrows from bank and on-lends to SHG members | MFI is intermediary |
NABARD SBLP Statistics
As of March 31, 2024 (NABARD Status of Microfinance in India 2023-24):
| Indicator | Data |
|---|---|
| SHGs with savings accounts | 1,44,22,000 (144.22 lakh) |
| Credit-linked SHGs (outstanding loans) | 77 lakh SHGs |
| Total loan outstanding | ₹2,59,663.73 crore |
| Per SHG loan outstanding | ₹3.35 lakh |
| Loan disbursed in FY 2023-24 | ₹2,09,285.87 crore (to 54.82 lakh SHGs) — 44% increase |
| Women SHGs proportion | 83.52% exclusively women groups |
| Households covered | 17.75 crore households — world's largest coordinated financial inclusion programme |
Updated data: As of March 31, 2025 (Sa-Dhan Bharat Microfinance Report 2025, in partnership with NABARD):
| Indicator | Data |
|---|---|
| SHGs with savings accounts | ~143.3 lakh SHGs |
| Credit-linked SHGs (outstanding loans) | 84.94 lakh SHGs |
| Total loan outstanding (SBLP) | ₹3.04 lakh crore |
| Households covered (savings-linked) | ~17.1 crore households |
DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihoods Mission)
- Ministry: Ministry of Rural Development
- Objective: Organise rural poor women into SHGs and federations; provide financial and livelihood support
- Statistics (as of December 2025 — PIB):
- 10.05 crore women mobilised into 90.91 lakh SHGs
- ₹51,368 crore of revolving funds and community investment funds provided
- ₹12.18 lakh crore in cumulative bank credit accessed by SHGs (from FY 2013-14; up from ₹10.20 lakh crore cited for 2024)
- 50,548 Bank Sakhis deployed for last-mile financial inclusion (up from 47,952 in June 2024)
- Implemented in 7,135 blocks across 742 districts
Andhra Pradesh Microfinance Crisis, 2010
Background
By 2010, Andhra Pradesh had become India's largest microfinance market, accounting for nearly one-third of the sector's national portfolio. NBFC-MFIs (SKS Microfinance, Spandana, Share Microfin, etc.) had expanded rapidly, competing aggressively for borrowers.
Causes of the Crisis
| Cause | Detail |
|---|---|
| Over-indebtedness | Average 9 simultaneous loans per household at peak |
| Multiple lenders | Borrowers took loans from multiple MFIs to repay earlier ones (debt trap) |
| Coercive recovery | Field officers pressurised borrowers publicly; reports of agents urging borrowers to take insurance payout on death |
| Absence of regulation | No cap on interest rates, no lender coordination, no income checks |
| Rapid IPO-driven growth | SKS Microfinance's IPO (2010) incentivised aggressive loan disbursement over borrower welfare |
Consequences
- Suicides: Over 200 borrowers reportedly died by suicide attributable to MFI pressure
- Loan repayments collapse: Borrowers stopped repaying; sector portfolio shrunk from US$5.4 billion (2010) to US$4.3 billion (2011)
- AP Government response: Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Ordinance, October 15, 2010 → converted to Act: AP MFI (Regulation of Moneylending) Act, 2010; required MFIs to register with government; weekly repayment collection at borrowers' homes banned; interest cap of 24%
Regulatory Aftermath
- RBI constituted the Malegam Committee (October 2010) → NBFC-MFI regulatory category created (2011)
- Key lesson: Market failure occurs when credit supply expands faster than borrowers' repayment capacity; regulatory supervision and SRO oversight are essential
JAM Trinity and PMJDY
JAM (Jan Dhan – Aadhaar – Mobile)
The JAM Trinity refers to the convergence of three platforms:
| Platform | Purpose | Significance |
|---|---|---|
| Jan Dhan (PMJDY) | Universal bank accounts | "Last mile" banking; DBT conduit |
| Aadhaar | Biometric digital identity | Eliminates ghost beneficiaries; KYC base |
| Mobile | Digital payment and communication | UPI, USSD-based banking, BC networks |
Together, JAM enables Direct Benefit Transfer (DBT) — government subsidies, welfare payments, and scholarships routed directly into beneficiary accounts, eliminating leakages.
Pradhan Mantri Jan-Dhan Yojana (PMJDY)
- Launched: 28 August 2014 by Prime Minister Narendra Modi
- Mission: National Mission for Financial Inclusion — "a bank account for every household"
Key Features:
| Feature | Detail |
|---|---|
| Account type | Basic Savings Bank Deposit Account (zero balance) |
| Overdraft facility | Up to ₹10,000 after 6 months of satisfactory operation |
| RuPay debit card | Issued to every account holder |
| Insurance | ₹2 lakh accident insurance cover (RuPay card); life cover ₹30,000 (for eligible accounts opened before Jan 2015) |
| Mobile banking | USSD-based (*99#) and app-based banking for feature phones |
Statistics (as of 13 May 2026 — pmjdy.gov.in):
| Indicator | Data |
|---|---|
| Total PMJDY accounts | 57.86 crore (578 million) |
| Accounts in rural/semi-urban areas | ~38.6 crore (~66.7%) |
| Women account holders | ~56% of total accounts (~32.4 crore) |
| Total deposits | ₹3.03 lakh crore; average balance ₹5,233 (record high) |
Jan Samarth Portal
- Launched: 6 June 2022 by PM Modi
- Purpose: A single digital platform hosting 13 credit-linked government schemes across education loans, agriculture infrastructure, business/livelihood, and entrepreneurship
- Features: Online application, real-time eligibility check (linked with CBDT, GST, UDYAM, UIDAI/Aadhaar, CIBIL), auto-recommendation of best scheme, real-time status tracking, end-to-end digital processing
- Significance: Eliminates multiple visits to banks; reduces information asymmetry between borrowers and government schemes
Advantages of Microfinance and SHG Model
| Dimension | Benefit |
|---|---|
| Financial inclusion | Reaches households excluded from formal banking — the "unbanked bottom billion" |
| Women empowerment | SHGs build financial literacy, leadership, and negotiating capacity; 83%+ SHGs are women-only |
| Social capital | Group solidarity, peer learning, collective grievance redressal |
| Credit discipline | Repayment rates in SHG-Bank Linkage historically above 95%; higher than individual formal credit |
| Political empowerment | SHG women participate in gram sabhas; many stand for Panchayat elections |
| Livelihood diversification | Access to credit enables micro-enterprises, reducing dependence on agriculture |
| DBT conduit | PMJDY accounts enable direct transfer of MGNREGS wages, PM-KISAN payments, LPG subsidies |
Criticisms and Challenges
| Challenge | Detail |
|---|---|
| High interest rates | Despite no formal cap, rates of 18–30% remain common; unaffordable for poorest borrowers |
| Over-indebtedness | Multiple loan problem persists; MFIN's 3-lender cap addresses this partially |
| Mission drift | NBFC-MFIs increasingly profit-oriented (IPO pressure, investor returns) vs. original social mission |
| Coercive recovery | Despite regulation, field-level abuse continues in some states |
| Urban creep | MFIs increasingly operating in semi-urban and urban areas; rural deepening suffers |
| Digital exclusion | Mobile-based financial services inaccessible in areas with poor connectivity or low digital literacy |
| Seasonal debt trap | Agricultural borrowers face repayment demands before harvest; cash-flow mismatch |
| Regulatory arbitrage | Different rules for NBFC-MFIs, cooperative MFIs, Section 8 MFIs create regulatory gaps |
Comparative Overview of Key Financial Inclusion Programmes
| Programme | Launch | Ministry/Body | Target Group | Key Feature |
|---|---|---|---|---|
| PMJDY | August 2014 | Ministry of Finance / DFS | All unbanked households | Zero-balance accounts; RuPay card; 57.86 crore accounts (May 2026) |
| SHG-Bank Linkage | 1992 | NABARD | Rural women | Savings-first; group credit; ₹2.59 lakh crore outstanding (2024) |
| DAY-NRLM | 2011 (restructured) | Ministry of Rural Development | Rural poor women | Mobilised 10 crore women into 90 lakh SHGs by June 2024 |
| MUDRA (PMMY) | 2015 | Ministry of Finance / MUDRA Ltd | Micro enterprises | Shishu (< ₹50k), Kishore (₹50k–5L), Tarun (₹5L–10L), Tarun Plus (₹10L–20L, Oct 2024) loans; FY25: 4.79 crore loans disbursed, ₹4.92 lakh crore |
| Jan Samarth Portal | June 2022 | Ministry of Finance | All credit scheme beneficiaries | 13 government credit schemes on single platform |
| Stand-Up India | 2016 | SIDBI / Banks | SC/ST/Women entrepreneurs | ₹10 lakh–1 crore bank loan for greenfield enterprises |
Cross-paper relevance
- GS3 — Indian Economy (primary) — SHG-Bank Linkage, NBFC-MFI regulations, Andhra Pradesh MFI crisis 2010, DAY-NRLM, Jan Samarth Portal
- GS2 — Social Justice — Women's empowerment through SHGs, NRLM, Deendayal Antyodaya Yojana
- GS3 — Rural development: credit flow to agriculture and rural households, MUDRA, PM SVANidhi
- Essay — "Microfinance: ladder out of poverty or trap of debt?"; "SHGs — seeds of women's economic independence"
Recent Developments (2024–2026)
NABARD SHG-Bank Linkage — Lakhpati Didi and the Next Phase
SHG-Bank Linkage scale data and DAY-NRLM statistics (10.05 crore women, 90.91 lakh SHGs by December 2025; ₹3.04 lakh crore outstanding per Sa-Dhan/NABARD March 2025 data) are in the NABARD SBLP Statistics and DAY-NRLM sections above. The developmental milestone that requires analytical discussion separately:
The Lakhpati Didi initiative (announced in Union Budget 2024-25; target raised to 3 crore in Interim Budget 2024) crossed 1.15 crore achieved by December 2024 (Rajya Sabha data, 3 December 2024); Lakhpati Didi Sammelan at Jalgaon (25 August 2024) felicitated 11 lakh new Didis simultaneously. A pipeline of 2.47 crore Potential Lakhpati Didis (PLDs) suggests the 3 crore target is achievable. This is the "SHG 2.0" transition: from credit-access (getting a loan) to enterprise-graduation (running a sustainable business).
The transition matters analytically because it represents a shift in what financial inclusion means. Phase 1 (PMJDY 2014-2024) was access — opening a bank account. Phase 2 (SBLP, MUDRA) was credit — getting affordable loans. Phase 3 (Lakhpati Didi, NRLM enterprises) is economic graduation — women owning productive assets and running enterprises that generate regular income. Each phase has different bottlenecks: access required banking infrastructure; credit required risk-assessment reform; graduation requires market linkages, value chain integration, and skill development.
The SARAS Melas (rural women's product exhibitions), GeM integration (government e-marketplace for SHG products), and ONDC integration (digital commerce platform for SHG sellers) are the three programmatic levers for the graduation phase.
UPSC angle: Lakhpati Didi (Budget 2024-25, 3 crore target, 1 crore achieved by late 2024), the three-phase financial inclusion model (access → credit → graduation), and ONDC/GeM as SHG market linkage tools are Mains GS3 analytical frameworks for inclusive growth through women's enterprise development.
RBI Microfinance Regulations — NPA Stress and Regulatory Effectiveness Test
The 2022 harmonised framework parameters (Rs. 3 lakh income limit, 50% instalment-to-income ratio, no hard interest cap, 3-lender limit) are in the Current RBI Framework section above. The analytical question these Recent Developments pose for Mains: has the 2022 framework worked?
By 2024-25, the answer is: no — severe stress has emerged. NBFC-MFI Gross NPA surged to approximately 16% as of March 2025 (up from 8.8% a year earlier — Brickwork Ratings, May 2025), the worst stress since the AP crisis. NBFC-MFI AUM growth collapsed to ~4% in FY25 vs 28% in FY24. PAR30+ (Portfolio at Risk beyond 30 days) reached 8.1% for smaller NBFC-MFIs by Q4 FY25. Separately, the NPA rate on MUDRA loans (Scheduled Commercial Banks) rose to 9.81% of outstanding loans as of March 2025 (Business Standard, August 2025). The stress was concentrated in southern states (Telangana, Karnataka, Tamil Nadu) — the same geography that experienced the 2010 AP crisis.
The RBI issued supervisory directions to several MFIs in 2024 for compliance violations, primarily around the 50% repayment-to-income ratio — the key governance mechanism. Field evidence suggests MFIs were under-reporting household income (inflating the denominator to stay within the ratio) or stacking multiple small loans below the threshold that triggers income verification.
The critical regulatory weakness: no hard interest rate cap was retained in the 2022 framework because it was seen as distorting credit allocation. But in practice, rates of 22-28% on small loans, stacked across 3 permitted lenders, create debt traps when household incomes are volatile. Early signs of recovery (Q4 FY25) suggest FY26 growth may return to 10-15%, but sector credibility has been significantly damaged.
UPSC angle: NBFC-MFI GNPA at ~16% (March 2025), MUDRA NPA at 9.81% (March 2025), AUM growth collapse (4% in FY25), the interest-cap trade-off (lender access vs borrower protection), income under-reporting as compliance evasion, and the regulatory dilemma are strong Mains GS3 analytical arguments on microfinance regulation.
PM SVANidhi — Restructured and Extended to 2030
PM Street Vendors AtmaNirbhar Nidhi (PM SVANidhi, launched June 2020) was restructured and extended by the Union Cabinet with the lending period now running to March 31, 2030 (total outlay: ₹7,332 crore). As of July 30, 2025, over 96 lakh loans amounting to ₹13,797 crore have been disbursed to more than 68 lakh street vendors (PIB/IBEF). The restructured scheme targets 1.15 crore beneficiaries including 50 lakh new beneficiaries.
Key enhancements (restructured scheme):
- First tranche increased from ₹10,000 to ₹15,000; second tranche from ₹20,000 to ₹25,000; third tranche unchanged at ₹50,000
- New UPI-linked RuPay Credit Card for immediate business/personal credit access
- Cashback up to ₹1,600 on digital retail/wholesale transactions
- SVANidhi se Samriddhi: 46 lakh beneficiaries profiled across 3,564 Urban Local Bodies (ULBs); 1.38 crore scheme sanctions generated
UPSC angle: PM SVANidhi restructuring (extended to 2030, ₹7,332 crore, 1.15 crore target, ₹15,000/₹25,000/₹50,000 tranche structure, RuPay Credit Card) is a Prelims 2027-relevant scheme update. The 96 lakh loans to 68 lakh vendors is the current headline achievement figure.
Jan Samarth Portal — Credit Scheme Convergence Platform
The Jan Samarth Portal (launched June 2022 by the Ministry of Finance) consolidates 13 government credit schemes — including PM SVANidhi, PMEGP, PM Mudra Yojana, Stand-Up India, Education Loans, and Pradhan Mantri Awas Yojana — on a single digital platform. Applicants can check eligibility, apply, and receive loan sanctions digitally through connected banks. By 2024-25, over 1.5 lakh applications have been processed through the portal.
The Jan Samarth Portal is part of the broader "Ease of Credit" agenda — reducing friction in accessing government-backed loans for MSMEs, students, and informal sector workers. Its integration with Aadhaar-verified KYC and GSTIN data allows faster underwriting. The portal is expected to scale significantly under the Budget 2025-26 focus on MSME credit access.
UPSC angle: Jan Samarth Portal (launched June 2022, 13 schemes, MoF), PM SVANidhi, MUDRA, and Stand-Up India scheme details (including Rs. 10 lakh – Rs. 1 crore for SC/ST/women under Stand-Up India) are UPSC Prelims match-question targets.
Exam Strategy
For Prelims: Know PMJDY launch date (28 August 2014), Nobel Prize year for Grameen Bank/Yunus (2006), Malegam Committee year (constituted October 2010), SHG-Bank Linkage start year (1992 by NABARD). Know that MFIN became SRO in 2014. Jan Samarth Portal was launched June 2022. Current RBI framework uses ₹3 lakh annual household income as eligibility limit with no hard interest cap but 50% instalment-to-income ratio.
For Mains (GS3): Structure answers as: (1) definition and importance, (2) models (Grameen vs SHG), (3) regulatory evolution (pre-AP crisis → Malegam → current RBI framework), (4) achievements (PMJDY data, NABARD SBLP data), (5) challenges (interest rates, mission drift, over-indebtedness), (6) way forward. Link to Articles 38, 39, 46 (DPSPs — welfare state, equal distribution, uplift of weaker sections), SDG 1 (no poverty), and SDG 5 (gender equality).
Key Data Points:
- PMJDY: 57.86 crore accounts (May 2026); ₹3.03 lakh crore deposits; 56% women; ~67% rural/semi-urban
- SHG-Bank Linkage: 84.94 lakh credit-linked SHGs; ₹3.04 lakh crore outstanding (March 2025) — updated from 77 lakh / ₹2.59 lakh crore (March 2024)
- DAY-NRLM: 10.05 crore women in 90.86 lakh SHGs (June 2024)
- MUDRA FY25: 4.79 crore loans; ₹4.92 lakh crore disbursed; NPA (outstanding) at 9.81% — March 2025
- NBFC-MFI GNPA: ~16% (March 2025) — severe stress post-2022 harmonised framework
- PM SVANidhi: 96 lakh loans, ₹13,797 crore to 68 lakh vendors; extended to 2030 (₹7,332 crore)
- AP Crisis: 200+ suicides; led to Malegam Committee and NBFC-MFI regulation
- MFIN SRO: ₹2 lakh total MFI exposure cap per borrower (November 2024)
Key Terms
Self-Help Group Bank Linkage
- Definition: The Self-Help Group–Bank Linkage Programme (SHG-BLP) is NABARD's flagship microfinance model under which informal groups of 10-20 poor members (predominantly women) pool savings and are linked to formal banks for collateral-free credit, with loans extended in multiples of the group's accumulated savings on the basis of mutual guarantee rather than individual collateral.
- Context: Launched by NABARD as a pilot in February 1992 (linking around 500 SHGs) following action-research begun in 1986-89, with RBI permitting banks to lend directly to SHGs. It has since become the world's largest microfinance programme by outreach. Since 2011 it has been substantially channelled through the Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM), which promotes SHG federations at village, block and district levels. RBI classifies SHG lending as priority sector and mandates collateral-free loans.
- UPSC Relevance: This is a foundational financial-inclusion concept that underpins UPSC questions on rural credit, microfinance, women's empowerment, and inclusive growth (GS3 economy; GS2 governance/welfare schemes). Prelims typically tests the institutional architecture — NABARD's promotional role, RBI's priority-sector and collateral-free norms, and the DAY-NRLM linkage. Mains favours analytical framing: SHG-BLP as a tool for financial inclusion and women-led development, the persistent regional imbalances and credit-linkage gap, and comparison with the MFI (microfinance institution) channel. No verified PYQ is available for this exact term.
