📘 Q.15 IAS Prelims 2023 — Economics (Financial Inclusion | Self-Help Groups)
🧷 Authentic Classroom Explanation by IAS Monk
📌 The Question:
Consider the following statements :
- The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
- In an SHG, all members of a group take responsibility for a loan that an individual member takes.
- The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
How many of the above statements are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
✅ Correct Answer: (b) Only two
🧠 Classroom Explanation
- Statement 1 is NOT correct
The origin of the Self-Help Group movement is not the State Bank of India.- Globally, SHGs trace their roots to the Grameen Bank of Bangladesh, founded by Muhammad Yunus.
- In India, the SHG–Bank Linkage Programme was initiated by NABARD in 1986–87, primarily to address the lack of institutional credit in rural areas.
- Statement 2 is correct
SHGs function on the principle of collective responsibility.- Members jointly guarantee loans taken by individual members, ensuring peer monitoring and repayment discipline.
- For larger credit needs, Joint Liability Groups (JLGs) may be formed within SHGs without dissolving the parent SHG.
- Statement 3 is correct
- Regional Rural Banks (RRBs) play a crucial role in financing SHGs at the grassroots level.
- Scheduled Commercial Banks actively support SHGs under RBI guidelines and Union Budget directives, strengthening the SHG–Bank linkage framework.
🔍 Curiosity Raiser
Why does the banking system trust group discipline more than individual collateral in rural credit delivery?
🧘 IAS Monk Whisper
When trust replaces collateral,
finance reaches where formal systems fear to tread.