United Bank of India raises overdraft limit for SHGs to Rs 1 lakh

KOLKATA: The slow off take of loans from banks has turned out to be a blessing for the less privileged who are otherwise ignored. Banks operating in West Bengal led by the United Bank of India are rushing to raise lending to the self help groups ( SHG) as they double their overdraft limits and encourage borrowing.

Banks are expecting this move to grow the size of average loans given to SHGs in West Bengal which in general suffers from low bank credit penetration. The average loans to SHGs in West Bengal is a poor Rs 54,000 a group, while the national average is Rs 88500 crore.

Banks in Andhra Pradesh have disbursed a total of Rs 15,000 crore to some 10 lakh SHGs, making the programme most successful in this state.

The Kolkata-based UBI has recently decided to double the limit, senior bank officials said.

National Bank for Agriculture & Rural Development has requested other lenders in West Bengal to follow UBI to raise the size of loans to local SHGs.

"We have requested UBI and other banks to discuss this issue in the next bankers meeting," Nabard chief general manager S Padmanabhan told ET.

Banks charges around 12% a year for loans to SHGs. The number of groups is over 73 lakh, including some 20-5 lakh under the Swarnajayanti Gram Swarojgar Yojana (SGSY) programme. About 45 lakh groups have outstanding bank loans as on March 2013.