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SHG BANK LINKAGE - A NOTE ON PAVALA VADDI !!
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- Government has issued guidelines introducing "Pavala Vaddi" Scheme to the Urban Self Help Groups with effect from 1-7-2005.
- The scheme will be applicable to all loans extended to Self Help Groups by Commercial, Cooperative and Regional Rural banks on or after 1-7-2005.
- Interest incentive in respect of active loans will be released to the Groups, once in each quarter/year, based on the performance of the repayment of loan duly obtaining loan account as on last day of the quarter/march 31st of the previous financial year.
- Self Help Groups which are having continuous savings and internal lending for 6 months are eligible for Bank Linkage.
- Banks are sanctioning direct loans to the Self Help Groups 2-4 times of the existing savings of the groups. Minimum of Rs 50,000/- per group.
- Group which were linked during the month of January 2006 and subsequent months are eligible for incentive subsidy only after 30th June 2006.
- Banks are charging 8.5 to 12% rate of interest on the loans sanctioned to the SHG�s.
- Government have absorbed the entire interest over and above 3% rate of interest on the loans taken by these groups from commercial banks.
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| Absorption of Interest |
| EXAMPLE |
Amount of loan sanctioned to the SHG |
10000-00 |
| Interest changed by the bank 9% initially paid by the group |
900-00 |
| Amount of interest borne by the group 3% |
300-00 |
| Absorption of interest by govt. |
600-00 |