State fails to pay banks, SHGs do not get interest waiver.
Hyderabad: Interest-free loans (Vaddi Leni Runalu) have become a burden to lakhs of self-help groups
(SHGs) as the TS government has not released funds to banks for the last two years.
The arrears, amounting to Rs 1,050 crore, have to be paid to banks which will then pass on the benefit
to the SHGs.
The state has about 4.35 lakh SHGs and most of them promptly repay their loans. The Centre has
classified the 13 undivided districts into category I and II to extend interest subvention to SHGs on
their borrowings from banks to the tune of Rs 3 lakh in rural areas.
In category I are Adilabad, Khammam, Karimnagar and Warangal district banks, that give loans at 7 per
cent interest. Of this, the Centre pays 4 per cent and the state government 3 per cent. For loans
between Rs 3 lakh and Rs 5 lakh, both in case of cash credit and term loans, the SHGs can avail of
In districts on category II, the state government extends VLR up to Rs 5 lakh. According to officials,
the total outstanding loans of SHGs is around Rs 50,000 crore.
The practice is that the SHGs pay interest to banks for the loans. Under VLR, the state government
credits the interest to the banks which reimburse the interest to SHGs.
In the four category-I districts, the Centre is paying its share to banks but the state government has
not. In category-II districts also, the state government is not paying funds to the banks for the
reimbursement of interest to SHGs.
Officials said that in addition to Rs 5 lakh loan under VLR, the state government is extending another
Rs 3 lakh interest-free loan under Stree Nidhi scheme. They say that each SHG can get interest-free
loan of `8 lakh from banks.
Since the SHGs are not being reimbursed the interest, they are facing problems in paying interest and
repaying loans. If an SHG does not pay interest, the rate of interest increases according to the banks’
guidelines. These SHGs may not get further loans if they have failed to pay their instalments.