The better debtor? Decline in default on credit given to women-led groups

At a time when the overall banking sector is grappling with the problem of bad loans, official data holds out hope in at least one segment — largely unorganised self-help groups (SHGs) led by women and engaged in small-scale economic activity.


Non-performing assets (NPAs) as a percentage of total loans given to these SHGs in January were 2.55 per cent, down from a high of almost 26 per cent before bank linkages were introduced under the National Rural Livelihood Mission (NRLM) in 2013.


If both pre- and post-NRLM periods are taken together, NPAs as a percentage of total loans as of January, would be 6.8 per cent. However, the marked change since linkages started as part of the NRLM should be noted.


Till January, such SHGs had loan dues of Rs 511 billion, of which about Rs 13 billion, or 2.6 per cent, was classified as NPAs, provisional data shows. By comparison, the overall gross NPA ratio of banks were expected to increase to 10.8 per cent by March and further to 11.1 per cent by September, according to the Reserve Bank of India’s financial stability report of December 2017.


In fact, on an average, India’s ratio of NPAs to gross loans has shown a steep rise in these past five years, hovering at 9 per cent as of 2016, according to studies. Compare this with other developing economies such as China, Brazil and South Africa — they all have NPAs under 4 per cent of loan dues, a level generally considered safe.


It is not that loans given to SHGs as part of the bank linkage under the NRLM were always financially sound. Before a structured form of linkage was provided under the NRLM, total NPAs as a percentage of loan dues were as high as 26 per cent.


Data showed that even after the NRLM change, there were wide regional variations in the extent of loans given to women-led groups turning bad. In Uttar Pradesh, Uttarakhand, Punjab, Meghalaya, and Arunachal Pradesh, NPAs as a proportion of dues were higher than the national mean. In 2013-14, loans amounting to Rs 240 billion were distributed to 1.01 million SHGs.


Until January 2018, these had risen to about Rs 310 billion and the number of SHGs had increased to 1.98 million. 


“Our experience in dealing with bank loans given to poor and largely marginal women-led groups is that their creditworthiness and payment promptness has improved considerably in the past few years,” a senior government official said.


Data showed that since 2011, women members of SHGs have accessed cumulative bank credit of about Rs 1.2 trillion under the NRLM. Around 3.5 million SHGs have benefited from the programme.