🧷 Authentic Classroom Explanation by IAS Monk

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📌 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?

(a) Only one
(b) Only two
(c) All three
(d) None

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✅ Correct Answer: (b) Only two

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🧠 Explanation

• Statement 1 is incorrect
  The concept of Self-Help Groups did not originate with the State Bank of India.
  • Globally, the SHG idea traces back to the Grameen Bank of Bangladesh, founded by Muhammad Yunus.
  • In India, the SHG–Bank Linkage Programme was initiated by NABARD in 1986–87, not SBI.
• Statement 2 is correct
  SHGs function on the principle of collective responsibility.
  • Members guarantee each other’s loans, promoting peer monitoring and financial discipline.
  • For larger loans, a Joint Liability Group (JLG) may be formed within the SHG.
• Statement 3 is correct
  • Regional Rural Banks (RRBs) are key grassroots financiers of SHGs.
  • Scheduled Commercial Banks actively support SHGs under the SHG–Bank Linkage Programme, as encouraged by RBI and Union Budget announcements.

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🔍 Curiosity Raiser

Why did India prefer SHGs over direct government subsidies for rural credit delivery?

(Hint: social collateral works better than physical collateral.)

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🧘 IAS Monk Whisper

When trust becomes collateral,
credit flows even to the poorest hands.