Case Studies

Report of the Committee on credit related issues of Swarnajayanti Gram Swarojgar Yojana

Note to readers : This committee headed by Prof Radhakrishnan was constituted in April 2008 and it submitted its report in early 2009.



India had experimented with numerous self-employment programmes. These were modified, consolidated and integrated into Swarnajayanti Gram Swarojgar Yojana (SGSY) in April 1999. Since then, SGSY has made rapid progress over time covering more than 31 lakh Self-Help Groups (SHGs).

However, only 22 per cent of the SHGs were provided with bank finance for undertaking income generating activities including micro enterprises.  What is worse, the bank assistance was abysmally low leading to low level of investment activity.  This shortcoming has been attributed to failure of public intervention to enhance the credit absorption capacity of SHGs as well as to the failures of credit delivery systems to reach the poor.  Since most of the SHGs were engaged in low technology and less productive traditional activities, the income gains to SHGs were very meagre.

Hence, SGSY had not been able to make substantial impact on the living standards of the swarojgaris.   The proposed two pronged strategy of universalization of coverage of SHGs with doubling the proportion of SHGs assisted by bank credit and providing skills at least to one youth of a Below Poverty Line (BPL) family necessitates restructuring of SGSY.

There is also need to strengthen the capabilities of the poor for bringing them into mainstream of development as active partners.  It is in this context, the Ministry of Rural Development (MoRD), Government of India (GOI), constituted a Committee on Credit Related Issues under SGSY in April 2008 to analyze the constraints in the adequate flow of credit to SHGs of SGSY and to suggest measures and strategies for promoting effective credit linkages to the SHGs (vide MoRD Letter No. 112011/5/08-SGSY-Credit).

The Committee is mandated to analyze innovative experiments initiated by the government as well as Non-Government Organizations (NGOs), and also examine the issue of provision of interest subsidy in place of capital subsidy.  The members of the Committee comprised of government functionaries dealing with rural development both from the Centre and States and representatives of the Planning Commission, Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD) and State Bank of India (SBI)………………………………………………..


R. Radhakrishna Chairman

Committee on Credit Related Issues under SGSY

Download at Link Below

Prof Radhakrishna Report on SGSY – 155 pages -800KB


Preface iv

Abbreviations  viii

0 Recommendations x

1 Public Intervention in Poverty Elimination and the SGSY 1

1.1 Introduction 1

1.2 Swarnajayanti Gram Swarojgar Yojana (SGSY) 2

1.3 Coverage of SGSY 4

1.4 Funds 5

1.5 Performance of SGSY 10

2 Credit Flow to SHGs and Individual Swarojgaris under SGSY 16

2.1 The Backdrop 16

2.2 State-wise Flow of SGSY Credit and Other Resources 17

2.3 Augmenting Allocation for SGSY 22

2.4 Reforming the Lead Bank Scheme (LBS) 24

2.5 Need for Uniform Rates of Interest on SGSY Credit 26

2.6 Capital Vs. Interest Subsidy 28

2.7 Use of Technology for Credit Reach 31

3 .SGSY in North-East States 39

3.1 Introduction 39

3.2 Commercial Banks in North-East States 40

3.3 Rural Regional Banks (RRBs) 44

3.4 Cooperative Banks in North East  45

3.5 SHGs and Bank Linkages in North East States 47

3.6 Performance of SGSY in North East States 49

3.7 Critical Weaknesses of SGSY in North East 54

3.8 Some Promising Initiatives in Credit  Flow to Selfemployment

3.9 Village Councils (VCs)/Village Development Boards (VDBs)/Traditional

Institutions as Financial Intermediaries 55

3.10 Concluding Observations 64

4 Role of Institutions and Innovations in SGSY 66

4.1 Performance Patterns 66

4.2 Role of Institutional Architecture 66

4.3 Kudumbasree Experience of Kerala 67

4.4 SERP Experience of Andhra Pradesh 69

4.5 Institutional Architecture and Innovations: Kudumbasree and SERP Experiences 73

4.6 Other Innovations 79

4.7 Lessons from Kerala and Andhra Pradesh 80

4.8 Towards Mission Mode 82

4.9 State Level Agency or Umbrella organization 84

5 Training, Capacity Building and Skill Development  87

5.1 The Problem 87

5.2 Training Funds and Coverage 88

5.3 Training Swarojgaris at Village Level 93

5.4 Functionaries of Delivery System 96

5.5 Demand-based Skill Development for Placement 98

6 Towards Restructured Poverty Elimination Programme 102

6.1 Emerging Policy Environment 102

6.2 Tasks Ahead 104

Abhay N

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Abhay is the founder and managing editor of India Microfinance. He is passionate about microfinance, financial inclusion and social entrepreneurship in India.

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