National Rural Livelihoods Mission (NRLM) has set out with an agenda to cover 7 crore rural poor households across all the 2.5 lakh Gram Panchayats in the country through 60-70 lakh self-help groups (SHGs) and federated institutions of the rural poor women in a period of 8-10 years and provide hand-holding support to help them come out of poverty. Interest subvention on the loans taken from the Banks is a significant step in this direction to promote the livelihoods of rural poor, by making institutional credit accessible at lower cost.
Interest subvention for the loans taken by women Self Help Groups, SHGs is an important initiative under Aajeevika – National Rural Livelihoods Mission (NRLM), a flagship programme of the Ministry of Rural Development, for empowerment and promotion of livelihoods of rural poor women. The interest subvention component was approved by Govt . of India in May, 2013, and is applicable for loans availed by women S.H.G s from 1st April 2013.
What is Interest Subvention ?
Interest subvention is the subsidy offered on interest rates.Interest subvention is offered on several lending schemes by the government to promote a particular industry. This helps the loan borrower by making available loans are cheaper interest rate as he/she need not to pay total interest on loan amount and the balance interest amount is borne by the government.
Thus, interest subvention is a form of waiver of some percentage of interest that promotes some particular industry and general public interest.
Ex – Aajeevika ( NRLM ) – Interest subvention for Women SHGs – Total Interest Rate – 7 % – Loan is offered at 4 % – 3% is subsidized and paid by the government on behalf of the borrower.
From 1st Feb 2014, all Banks (PSBs, RRBs, Cooperative Banks and Private Banks) will lend to all the women SHGs at upfront 7% interest(for loans upto Rs. 3 lakhs) in 150 select backward districts.
These SHGs will get a further 3% subvention on prompt repayment, thus the effective charge on all such loans will be 4% only. In addition, all women SHGs with outstanding loans (from 1stApril 2013 onwards for loans upto Rs. 3 lakhs) will pay interest only at 7% from February 1st.
In the remaining districts, women SHGs that are NRLM compliant and are regular in repaying Bank loans will enjoy interest subvention on reimbursement basis, making effective interest 7% for loans upto Rs. 3 lakhs. This is also with effect from 1st April 2013.