Question 29 from UPSC CSE 2023 - Economics

Question

Consider the following statements:
1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
How many of the above statements are correct?

IASCODEX · Accepted Answer

Correct Option: B. Only two

Strategy: The evaluation identifies the correctness of each statement regarding Self-Help Groups (SHGs):
*   **Statement 1:** Incorrect. The SHG model was initiated by NABARD in India, not SBI.
*   **Statement 2:** Overgeneralizes. While mutual responsibility exists, full joint liability is not uniformly applied to every individual loan. Collective guarantees are used for group-based loans, and Joint Liability Groups (JLGs) are formed for larger loans within SHGs.
*   **Statement 3:** Correct. Regional Rural Banks (RRBs) and scheduled commercial banks are extensively involved in SHG-bank linkage.
Based on this, only statements 2 and 3 can be considered correct, assuming a general interpretation of Statement 2.

Key Info: Self-Help Groups (SHGs) are informal microfinance collectives, primarily for women's financial inclusion and empowerment. The SHG movement in India is credited to NABARD, which in 1992 pioneered the SHG-Bank Linkage Programme for providing microcredit. This initiative drew inspiration from the Grameen Bank model of Bangladesh, established by Muhammad Yunus.

*   SHGs pool savings from members for internal lending and can access formal credit through group collateral.
*   In the standard SHG model, loans from banks are guaranteed by mutual trust among members rather than formal joint liability. For larger or individual loans, Joint Liability Groups (JLGs) may be formed within SHGs to share specific loan liability.
*   Regional Rural Banks (RRBs) and Scheduled Commercial Banks actively participate in the SHG-Bank Linkage Programme, providing loans and serving as Self Help Promotion Institutions (SHPIs).
*   SHG-Bank linkage is supported by RBI guidance and regular Union Budget announcements, highlighting its importance in financial inclusion policies.
*   The State Bank of India is a prominent participant in SHG financing but did not originate the SHG programme.
*   Beyond credit, SHGs play crucial community roles, including financial literacy, empowerment, and village institution building.

IASCODEX · Answer

Option A: Only one

IASCODEX · Answer

Option C: All three

IASCODEX · Answer

Option D: None of the above statements is correct