STATE LEVEL BANKERS COMMITTEE, TAMILNADU CONVENOR: INDIAN OVERSEAS BANK

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1 STATE LEVEL BANKERS COMMITTEE, TAMILNADU CONVENOR: INDIAN OVERSEAS BANK STATE LEVEL REVIEW MEETING 2009: GROUP DISCUSSION GROUP I AGRICULTURE & ALLIED ACTIVITIES Leader: Shri. V M Venkatachalam Senior Manager Indian Bank Head Office Chennai Rapporteur: Shri. S. Siddarthan Senior Manager Lead Bank Department Indian Overseas Bank Central Office, Chennai I. 2% Interest subvention scheme for short-term crop loans in Issue a. As per communication dated of Dept of Financial Services Ministry of Finance, GOI, interest subvention is available to farmers from the date of disbursement till the date of repayment subject to a maximum period of one year. But the guidelines advised by RBI vide their circular RBI/ /186/RPCD.No.PLFS.BC.33/ / dated restrict the subvention period to March 31 st 2010 for loans disbursed during for Kharif season and June 30 th 2010 for loans disbursed duringfor Rabi season. Suggestions & Consensus arrived: Benefit of Interest subvention be given to all farmers from the date of availment of loan till the regular repayment period or a maximum of one year whichever is less. Restricting interest subvention to seasonality which is not uniform throughout the country leads to All farmers should be given Interest subvention for maximum period of one year or till repayment whichever is less, from the date of availment

2 of loan. There should not be any cap on the time restricting the subvention period, as it leads to Cumbersome procedure of crediting interest subvention relating to varying periods to thousands of farmers and Denying full benefit of interest subvention during crop/repayment period to the farmers. b. Short Term Crop Loans disbursed by Private Banks: (Referred by Tamilnad Mercantile Bank Ltd.TMB) Issue : Farmers who avail short term crop loans from Private Sector Banks are deprived of interest subvention benefit. Hence, farmers do not prefer private sector Bank for availment of crop loan. Consensus : AsInterest subvention to farmers is available only when they avail short term crop loans from Public Sector Banks / Regional Rural Banks / Cooperative Banks. Farmers who avail short term crop loans from Private Sector Banks are not being extended interest subvention benefit. Hence many farmers are switching over to Public Sector Banks operating in their area. Private Sector Banks are also haverequired to achieve the various norms under priority lending,18% and 10% norm in respect of agricultural advances and advances to weaker sections. Lack of interest subvention for short term crop loans disbursed by Private Banks make the task of attaining the national norm of 18% and 10% very difficult due to loss of such business to nearby PSBs/RRBs/Coop Banks. Hence interest subvention has to be made available for short term crop loans disbursed by Private Sector Banks also. The forum is requested to deliberate and offer its views. 2

3 Suggestions & Consensus arrived: The forum suggested that interest subvention has to be made available in respect of STPLs availed by farmers from Private Sector Banks also II. 1% additional interest subvention scheme (Referred by IOB) Issue : Additional 1% interest subvention is eligible for farmers who repay within one year of disbursement. Loans given to farmers during March 2010 and repaying the same before March 2011 are eligible for 1% interest subvention. Banks can make this claim only after March 2011 subject to repayment by borrower within one year. However as per RBI Circular, Banks have to claim before , that too, as one-time claim. This anomaly may be clarified. As per RBI communication dated , it is stated that Banks have to credit the additional 1% subvention to the farmers account only after their prompt repaymentthe forum may deliberate and seek reimbursement from RBI, by submitting ONE TIME consolidated claim for the entire year ( ) latest by July 31, 2010offer its views / suggestions. For crop loan disbursed during Rabi , the repayment date extends beyond July Whether additional interest subvention of 1% will be available for such loans repayable after July Suggestions & Consensusarrived: RBI is to clarify the Banks regarding 1% additional interest subvention scheme. Suggestion is time cap to be removed as enumerated above. III. Forced sale of fertilizers in Cuddalore District (Referred by (. IV. NABARD) 3

4 Issue:, Chennai has drawn the attention to the complaint of Welington Reservoir Irrigation Farmers Association that Murugangudi and Pennadam Branches of Canara Bank in Tittagudi Taluk in Cuddalore District have been compelling the sugarcane farmers of Ambiga Sugar Mills for lifting fertilizers as kind component under cop loan from Mustang Trading & Investment Coy (MTC) which is a sister concern of Ambiga Sugar Mills. Pointing out that they have removed the restriction on compulsory issue of the kind component to the farmers, NABARD, Chennai have advised for a) extending the freedom of cash disbursement, and b) to ensure phased purchase of fertilizers in consonance with the spirit of KCC endeavour. Suggestions & Consensusarrived: Representatives of Canara Bank clarified that now their Bank is not compelling the farmers for lifting fertilizers from MTC. Noting the same the forum reiterated that NABARD s instructions in this regard have to be complied with strictly by all the banks. V. IV. Flow of Credit Submission of weekly MIS (Referred by Commissioner of Agriculture, Govt.of Comm. Of Agri, GOTN) The details of disbursement of credit through Co-operative Banks are available on weekly basis. But, the same details through Commercial Banks are made available only in the Agenda papers of DCC / SLBC meeting being convened once in a quarter. This type of belated information on credit flow is of little use to Agriculture Dept., Government Tamil Nadu) Issue:. Hence, the Agricultural Production Commissioner and Secretary to Government during the 119 th SLBC meeting held on has emphasized that the details of progress made in the credit disbursement should be provided to Lead District Managers on weekly basis. In this regard, the SLBC has already advised Member Banks for providing credit flow information to district level JDAs. 4

5 Suggestions & Consensusarrived: As LDMs informed that submitting weekly reportingprogress report is very difficult, the. The forum suggested monthly reporting of crop loan data., instead of weekly reporting by LDMs The forum also suggested that Department of Agriculture may d design a simplified format The forum advised Controlling offices of Banks to instruct their Branches to submit monthly data to LDM for providing consolidated report to the District Administration / Government. VI. Kisan Credit Card (KCC) (Referred by Commissioner of Agriculture, Govt.of Tamil NaduComm. Of Agri, GOTN) Issue: While the details of KCCs issued during the quarter is made available in the SLBC agenda, the cumulative data on Kisan Credit Cards issued since inception is not readily available. Further in the 119 th SLBC meeting, the Agricultural Production Commissioner and Secretary to Government has requested the banks to issue KCC on Mission Mode citing the reason that KCC will also serve as an identity card for availing subsidy in future as per the reference made by the Hon ble Prime Minister of India that the subsidy should go directly to the farmers. Suggestions & Consensusarrived: The forum requested to provide cumulative data on KCCs issued in the SLBC Agenda. The forum noted that SLBC has already advised Banks to cover all eligible and willing farmers under KCC on mission mode and reiterated that the same should be accomplished without any further loss of time. The forum also advised Banks to furnish the details of KCCs issued to both LDMs and SLBC. 5

6 VII. VIII. National Agricultural Insurance Scheme (NAIS) (Referred by CommissionerComm. Of Agri, GOTN) It is observed that the number of Agriculture, Govt.of Tamil Nadu) Issue : Coverage of Non loanee farmers covered under NAIS has increased from 898 ( in ) to ( to in ) whereas; the coveragenumber of loanee farmers increased from to which is not commensurate with non loanee farmers. Consequently, subsidy utilization is poor.covered during the same period has increased from 898 to Hence, the sanctioned subsidy on premium under the NAIS scheme could not be utilized in full besides depriving the farmers from availing loss compensation. In this context, the following issues need consideration. For jewel loans, the insurance premium is not deducted. Even under crop loan, the insurance premium is not collected The Government policy to motivate and involve more farmers under insurance scheme is not able to be implemented to the extent envisaged with the result premium subsidy remains unutilized. State Government and Central Government are paying 2.5% as service charge to Banks for the implementation of NAIS on 50:50 basis. Hence, banks may consider opening a separate cell in their branches exclusively to deal with NAIS for collection of premium from loanee farmers and timely remittance of the premium to Agricultural Insurance Company. Suggestions & Consensusarrived: All crop loans for notified crops in notified areas including crop loans against jewels should be compulsorily covered under NAIS. The forum suggested for rationalization of the premium and suggested to subsidize 100% of premium to at least MF/SF. Separate cell at controlling offices should be formed to look after NAIS 6

7 The forum advised Officials of AIC to attend DCC meetings, wherein progress made under NAIS should be reviewed on a regular basis. AIC should intensify Awareness Camps/Mass media publicity through TV/AIR. AIC to approach Director of Public Relations, Information and Broadcasting Department for making film script on NAIS VII. Weather Based Crop Insurance Scheme (WBCIS) Issue: Weather Based Crop Insurance Scheme (WBCIS) will be implemented in select Districts of Tamilnadu viz. Dharmapuri, Salem, Ariyalur, Perambalur,Virudhunagar,Coimbatore, Villupuram and Dindigul Districts on a pilot basis. The salient aspects of WBCIS are furnished below. WBCIS will be implemented on pilot basis in select districts of Tamilnadu as per the guidelines of Govt. of India. Three insurance companies viz., Agricultural Insurance Company of India Ltd, M/s IFFCO-TOKIO General Insurance Company Ltd and M/s ICICI Lombard General Insurance Company Ltd are involved in the Pilot Project. Under WBCIS in the select districts loanee farmers should be compulsorily covered and non-loanee farmers will be covered on voluntary basis. The forum is requested to deliberate and offer its views. Suggestions & Consensusarrived: One day sensitization programme is to be organized by AIC and other implementing insurance companies for Bankers on the subject. Awareness Camps to be organized for farmers at district/block levels. 7

8 VIII. National Agriculture Insurance Scheme (NAIS) (Referred by (SBI) Issue: Farmers feel the premium is very high with regard to sugarcane and banana crops under NAIS. For sugarcane, individual mills have tie-up with one of the General Insurance Companies. Accordingly, branches debit insurance premium and send the amount to the Company. In such cases lands of individual farmers are taken into account for claim settlement whereas under NAIS, Firka level damage is taken into account. Farmers prefer individual level settlement. Under National Agricultural Insurance Scheme, for finance made through Sugar Cane Tie Up Scheme, settlements are not made in proportion to the loss or outstanding but only minimum amounts. In case of Banana also due to high rate of premium, the farmers are reluctant to join the NAIS scheme. The above issues need to be addressed. Suggestions & Consensusarrived: AIC to clarify whether second Insurance can be taken under NAIS, for sugarcane farmers, who have already insured the crop with some other Insurance Company, under tie up with sugar mills, and in case of crop failure whether both the agencies will be settling the claim amount. IX. SGSY (Referred by SBI) Issue: Under Economic Activities (SGSY-EA), the Govt. Departments should provide both forward and backward linkages such as training and skill development, procurement of raw materials at reasonable prices and marketing etc which are not adequately done at present. NGOs are also not 8

9 taking much interest in this area. This has led to failure and render the units with low key activities unviable. Suggestions & Consensusarrived: The forum suggested that Government may facilitate supply of raw materials to and assist in marketing of products by SHGs at reasonable prices, earmarking certain amount of Government departments may purchasepurchases from SHGs, marketing infrastructure near activity clusters, branding etc. X. ANIMAL HUSBANDRY The forum after deliberations also recommended the following in respect of animal husbandry sector. The forum requested Department of Animal Husbandry to ensure participation of their officials in the District Level meetings. The forum also suggested that Department of AH may act in coordination with RSETI s if any on Training modules for AH activities for the benefit of farmers 9

10 STATE LEVEL REVIEW MEETING 2009: GROUP DISCUSSION GROUP II: INDUSTRIES & SERVICES Leader: Rapporteur: Shri. Rajendran Shri. T.R. Santhanam Chief Manager Senior Manager Canara Bank Lead Bank Department Circle Office Indian Overseas Bank Chennai Central Office, Chennai I. Prime Minister s Employment Generation Programme (PMEGP) Secretary, MSME Department is conducting review of progress made under the scheme during the current year. The following points have emerged form the review meetings. Issues: The progress made in sanction / disposal of loan applications is poor. Delay in disbursement of sanctioned loans. Delay in claiming subsidy, which needs to be claimed immediately after the first disbursement. Delay in submission / non submission of MIS. Consensus: The forum noted that there is no specific target fixed to Bank Branches under PMEGP. Controlling offices of banks should review the progress made by their branches under PMEGP Scheme and ensure expeditious disposal of loan applications received under PMEGP. Loan applications should be forwarded to Bank Branches under Regd Post Ack Due. Copy of Loan applications / List of loan applications sent to Branches has to be forwarded to Controlling Offices of Banks to enable them to monitor the progress made by their branches. 10

11 Review should be done in the BLBC Meetings also the by BLBC Convenor / LDM with representatives of nodal agencies. Noting that in some banks, branches are not empowered to sanction loans and loan processing is done by their Central Processing Units, the forum suggested that branches should be empowered to sanction loans under the scheme within branch powers to avoid delay. Forum called for better co-ordination between DIC, KVIB, KVIC at district level. Loan Applications should be sponsored in reasonable proportion to the district target and sponsoring of a large number of loan applications has to be avoided. All eligible loans under PMEGP to be covered under CGTMSE. The data required for covering loans under CGTMSE should be made available in common application form. Identified beneficiaries must be imparted mandatory training without delay. There should be a follow up/review for disbursement of the sanctioned loans also. Bank branches after sanction should claim subsidy immediately. Nodal Agencies were requested to send claim forms to branches for claiming subsidy (as is being done by DIC, Tiruvallore) along with loan application. In some banks, processing/subsidy claim is done by nodal offices, resulting in delay in preferring claim, which needs to be rectified. Awareness programmes should be conducted by KVIC at state level. Sensitization programmes at districts for officials of both banks and nodal agencies must be conducted. Controlling Offices of Banks must ensure prompt and error free report on performance by their Branches. II. Financing of Common Facility Centres (CFC) in recognized clusters Cluster based financing is now under focus due to importance of clusters in industrial production and economic growth. Clusters can be strengthened and made more viable by creation of CFCs for the benefit of all units operating in the clusters. Central and State Governments are granting subsidy for establishment of CFCs, under cluster development programmes. Few 11

12 examples are Safety Match Clusters in Virudunagar Dist and Brick Clusters in Tirunelveli Dist. Issues: Banks can play crucial role in setting up of CFCs by financing the CFCs to bridge the gap between the grant amount and project cost. Consensus: Addl Director of Industries & Commerce, Govt. of Tamil Nadu explained that upto 80% grant is available for procuring machineries for CFCs which are set up by forming Special Purpose Vehicles. He added that Banks may finance towards promoter s equity, civil works etc., besides financing clusters. The forum requested the Director of Industries to provide the details regarding clusters under Common Facility centers (CFC) and the finance requirements including detailed project reports, so that bankers can take positive view on financing CFCs III. Credit flow to Non Farm Sector Issue: Credit flow to Handloom/power loom, Tiny Sector, Village industries and Rural Artisans under ACP hover around 20 to 50% of the allocation. The forum may discuss and suggest ways for increasing credit flow to Micro & Small Enterprises in general and the above sectors in particular. Consensus: Branch Managers to be sensitized regarding credit to rural non-farm sector so that pressure on agriculture is reduced in rural areas. Specialized micro finance branches can be opened. Dept of Industries & Commerce may consider promoting Activity based groups/jlgs on the lines done by Agricultural Department in respect of farmers. DIC to promote tiny sector estates and facilities for tiny sector sheds should be made available by SIPCOT. 12

13 Interest subvention given to agriculture sector may be considered to non-farm tiny sector also. Need based restructuring of loans on an ongoing basis should be made available. Liberal working capital assessment to the sector should be made available. Business facilitator/business correspondents system to be implemented by all banks. Banks to focus on financing Agro processing sector. The pending loan applications of handloom weavers group should be disposed off immediately. IV. Classification of Retail Trade under MSME sector: Recently RBI has advised banks vide circular dated to classify Retail Trade under services part of Micro and Small Enterprises based on investment norms (para 2). Point No.3 of the circular states that retail traders with credit limits not exceeding Rs.20 lac would hence forth be part of the Small (Service) Enterprises. Issue: Inclusion of credit to private retail traders with credit limit of more than Rs 20 Lacs under priority sector (MSEs) subject to investment norms as per MSMED Act 2006 needs to be clarified. Panel may discuss this aspect. Consensus: The forum after deliberations advised that retail trade has to be classified under MSME on the basis of investment norms as per para 2 of RBI Circular dated unless any instructions to the contrary are received from RBI. V. Recovery of PMRY Loans by Special Deputy Tahsildhars Issue: Special Deputy Tahsildhars were deputed for recovery of PMRY Loans. As PMRY Scheme has since been abolished, the forum may discuss and offer its views on utilizing their services for recovery of loans under other 13

14 Government Sponsored Schemes in addition to existing PMRY loans with concurrence of State Government. (LDM, Pudukottai) Consensus: The forum suggested that Special Tahsildhars deputed for recovery of loans under PMRY may be utilized for recovery of loans under other Government sponsored schemes as well. The forum advised that bank branches should coordinate with the special tahsildhars for improving their recovery performance. The forum also requested the Government of Tamil Nadu to post Special Tahsildhars for all the 32 districts of the state. VI. Release of subsidy under PMRY PMRY Scheme has been abolished with effect from the programme year Issue: Subsidy is yet to be received for the years and Consensus: The forum noted that the subsidy claims of Banks under PMRY are under process at RBI, Mumbai and subsidy will be released to banks shortly. 14

15 STATE LEVEL BANKERS COMMITTEE, TAMILNADU CONVENOR: INDIAN OVERSEAS BANK STATE LEVEL REVIEW MEETING 2009: GROUP DISCUSSION GROUP III: LEAD BANK SCHEME AND OTHER MATTERS Leader: Rapporteur: Sri Rajmohan Shri. N. Sampath Chief Manager Senior Manager State Bank of India Lead Bank Department Local Head Office Indian Overseas Bank Chennai Central Office, Chennai A. Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) (Referred by TNHB) The salient features of the above Scheme were discussed in 118 th Meeting held on SLBC Issues: 1. Loan Application Format 2. List of Documents to be furnished by the beneficiaries for construction of new house / purchase of ready built house. Viz. approved plan, evidence of ownership etc. 3. Rate of Interest 4. Disbursement Stages 5. Subsidy administration mode of drawing subsidy 6. Sponsoring Agency 7. Target Consensus: a. Loan Application Format: 15

16 The forum after deliberation designed an application format (furnished in the annexure) and advised that the format may be adopted by all the Banks in bi-lingual form. b. List of Documents to be furnished by the beneficiaries for construction of new house/purchase of ready built house/allotment by TNHB: i. Authenticated copy of Family Ration Card/Voter ID Card ii. iii. Copy of Patta/Title Deeds/Approved Plan with estimate Copy of Income Certificate issued by competent authority (to ascertain the eligible loan amount ie.,ews or LIG) EWS : Economically weaker section (Family income not above Rs.3300/- per month) LIG : Low Income Group (Family income between R.3301 Rs.7300/- per month) Except the legal opinion all the documents are to be annexed to the application and routed through the Sponsoring Agency. [ Subsequently in a meeting held in TNHB, Banker concurred that any photo ID approved by RBI for KYC can also be taken in lieu of Ration Card or Voter ID Card]. c. Rate of Interest: Individual Banks will decide ; but forum suggested 9%. d. Disbursement of loan in stages as may be decided by the respective Banks/Branches. e. Subsidy Administration : 16

17 The Scheme is Interest Subsidy scheme Front ended. Respective banks to enter into MOU with NHB/HUDCO (Nodal Agency). f. Sponsoring Agency: Tamil Nadu Housing Board (TNHB) will be the sole agency for sponsoring the applications. g. Target: The forum noted that Ministry of Finance, Government of India have already advised that the coverage under ISHUP could be decided at a decentralized level at the Municipality / district / State level by involving Urban local bodies and State Government. Hence the targets have to be fixed based on the number of beneficiaries in the identified clusters of EWS / LIGs. Hence the forum concluded that TNHB would inform district-wise target to the respective LDMs, to enable them to allocate among Banks and also to inform to SLBC for consolidation. The forum also advised that the performance against such allocation / target should be monitored and reviewed regularly in DCC Meetings B. Educational Loans (Referred by LDM, Pudukottai, Indian Bank, Bank of India) Issues: (i) Service Area concept may be introduced for Education Loans so that Banks can on the one hand respond to education loans positively and on the other hand multiple finance can be avoided. (LDM, Pudukottai) As per IBA guidelines If the parents / guardians of the student are located in the same district of the branch in which the application is received, there 17

18 is no need for the same to be sent to another bank on grounds of Service Area other than bank being closer to residence of applicant. (Indian Bank) (ii) Eligibility: Sanction of education loans to all students who got admission through a merit based selection process, including admissions under Management Quota. Some Banks have stipulated a condition that the parent of the student who got admission under Management quota should be an income tax assessee. (Indian Bank) (iii) Fee Structure: Mr. Justice Balasubramanian Committee was constituted for fixing the fee structure for various courses in Self Financing Colleges. The committee has submitted its report which is yet to be communicated by Government Order. Communication of the fee structure will enable banks in arriving at the quantum of the loan. (iv) Private Banks like ICICI / HDFC Banks are not granting loans stating that their Banks have separate eligibility criteria. (LDM, Karur) Consensus: (i) Service Area: Adoption of Service Area concept for educational loans is preferred in the interest of the student community for timely availment of loan and for equitable distribution of loans among the banks. Ultimate implementing decision should be taken at district level depending on local situation. (ii) Eligibility: Banks should follow eligibility criteria as per IBA guidelines without adding any extraneous conditions by the banks. (iii) Fee Structure: The forum requested Government of Tamil Nadu to release Justice Balasubramanian Committee report on Fee structure which will enable banks to arrive at the quantum of loan. (iv) Private Sector Banks should also involve themselves in providing education loans as per IBA guidelines. C. Roadmap for Financial Inclusion: 18

19 Issue: High Power Committee of RBI has recommended that a Sub-Committee of the District Consultative Committee (DCC) should draw up a road map to provide services through a banking outlet at every village with a population of over 2000 at least once a week on a regular basis. By March 2010, the Sub-Committee should come out with a time frame within which this can be achieved and the time frame to cover all eligible villages should not be later than March Consensus: Forum suggested that Banks have to adopt BC (Business Correspondent) /BF (Business Facilitator) route to expedite the goal of providing banking services to villages having population of more than 2000 by March Forum also advised that DCCs have to form Sub Committee immediately, enumerate villages with population of 2000 which are not having banking facilities, allocate such villages to bank branches and draw up a schedule for various stages to be completed. D. Direct transfer of Social Security Pension into bank accounts of beneficiaries. (Referred by RBI, Chennai) Issue: During the meeting of the Group set up to examine the feasibility of direct transfer of social security pension to the beneficiaries accounts, it was pointed out that there were delays in transferring funds by the Nodal Bank to the disbursing branches of banks and this has resulted in delayed payments to the beneficiaries. It was suggested that a system should be put in place to ensure that the accounts of the beneficiaries are credited on scheduled date so that the beneficiary is free to withdraw the amount on any day. Consensus: 19

20 Banks have to evolve a system and ensure that the beneficiaries accounts are credited on scheduled date and the RBI direction in this regard should be complied with in letter and spirit. E. Special Package Housing - Insurance Coverage for borrowers As per the guidelines issued by IBA, Free Life Insurance Cover for the entire amount of outstanding loan has to be provided to the borrower by the bank. Issue: In the case housing loans availed jointly by more than one borrower, whether a) all the joint borrowers are to be insured or b) each borrower has to be insured for pro rata loan amount or c) each borrower is to be insured for the entire loan amount. Consensus: Forum suggested that all borrowers may be covered on pro rata basis under insurance so that Total insurance in case of joint accounts is equal to the Loan amount. F. Participation of Private Sector Banks under Lead Bank Scheme & Government Sponsored Schemes. (Referred by LDM, Ooty) High Power Committee has recommended that Private sector banks should involve themselves more actively by bringing in their expertise in strategic planning and leveraging on information technology. Issue: (i) Participation in DCC/DLRC/SC Meetings in the District is at a low level. (ii) Implementation of Government sponsored Schemes by Private Sector Banks is minimal. Consensus: 20

21 Forum advised Private Sector Banks to take note of the recommendation of the High Power Committee and involve themselves actively in the implementation of Lead Bank Scheme, besides actively participating in various Lead Bank Meetings at appropriate level. G. Allocation of areas / villages / wards ( Referred by SBI) Issue: a) Arbitrary allocation of villages / Wards to the existing as well as new branches without placing at the BLBC meetings / Dt Level meetings. b) Villages with high NPA, which are far away are allotted to SBI even though other Bank branches are functioning nearby. The above has resulted in difficulty for SBI branches to dispose letters or applications in respect of Educational Loans and Grievance Day petitions received by LBO. Consensus: The forum reiterated that allocation of villages/wards to respective bank branches to be discussed at the BLBC Meetings and approved by DCC concerned. J. Indira Awas Yojana (Referred by SBI) Issue: Persons who have not started construction are approaching the Branches for loans. Consensus: Loans under the IAY scheme are TOPUP loans meant for completion of construction. The loan component has to be disbursed to the beneficiary on utilization of eligible subsidy and margin. K. NREGS (Referred by SBI) 21

22 Issue: Though large number of no-frill a/cs are opened, payment of wages are not routed through the accounts. Consensus: Forum Requested the State Govt. to consider routing payment through banks. the NREGS L. Recovery of loans given under Govt. Sponsored Programmes - (Referred by SBI) Issue: District Administration should have machinery to help the banks to recover loans. Consensus: The forum requested State Government to strengthen the Recovery Mechanism by positing Special Deputy Tashildars to all Districts exclusively for recovery of loans granted under various Govt. Sponsored Schemes. M. SHGs - (Referred by SBI) Issue: New NGOs are poaching into the existing group members of SHGs organized by other NGOs by luring them with high amount of loans. Hence, there are chances of multiple borrowings which may ultimately result in over dues and non recovery of loans due from SHGs. Consensus: Details regarding poaching of SHGs by certain NGOs may be placed before DCC with a request to the District Administration to take suitable action. A central Registry for SHGs is also required to be maintained. ID cards for SHGs may be issued. 22

23 N. Loans to groups having mentally challenged people as members under Vazhndhu Kattuvom Project. (Referred by LDM, Cuddalore) Under the above scheme mentally challenged people are also enrolled as members of SHGs. Banks open SB accounts in the names of such SHGs. Issue: Now Project Authorities are requesting to credit link SHGs with mentally challenged people. Consensus: Loans to SHGs with mentally challenged people as members can be granted against documents executed by the guardian of the mentally challenged people appointed by the Court or under National Trust for the Welfare of persons with autism, cerebral palsy, mental retardation and multiple Disabilities Act. O. Submission of MIS / Lead Bank Returns Issue: LDMs continue to face delay in Submission / non submission of MIS / Lead Bank Returns by banks. Consensus: Forum suggested that Controlling Offices of Banks to take the responsibility of generating the returns in the System and provide the same for compilation by LDM. Rationalizations of Lead Bank Returns is also suggested. P. Issue: Notified Centres for creation of Equitable Mortgage: Consensus: The forum requested State Government to notify all centres with bank branches in the State for the purpose of creation of equitable mortgage. 23

24 NAME OF THE BANK Branch Application for loan under Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) Loan No. Photo I hereby apply for a loan of Rs (Rupees..,....) repayable in.. monthly instalments for the purpose of construction/acquisition of house/flat under the ISHUP scheme. I/we confirm having understood the terms and conditions for the above scheme and agree to abide by the same. 1. Name of the Applicant(s) : 2. Sex : Male / Female 3. Father s / Husband s Name: 4. A) Present Residential Address: ** B) Permanent Residential Address **How long residing in the above address : 5. Phone / Cell Number : 6. Voter s ID No. : Ration Card No.: 7. Age : Date of birth : 8. Marital status : Married / Unmarried S.No. 9. Whether belongs to SC / ST / BC / MBC / Minority / Phy. Handicapped (strike out the non relevant categories ) Applicant family details: (Family Ration card copy should be enclosed) Name Age M/F Relationship Educational qualification Business activity Monthly Income Annual Income 24

25 11. Family s total annual Income: 12. Whether having accounts with Bank : Yes / No If yes: Name of the Bank: Branch: A/c. Number: 13. Whether owns any house in his/her or dependent s name: Yes / No 14. Whether owns any plot in his/her or dependent s name : Yes / No If yes, furnish the Location & Address details: 15. Details of property proposed to be purchased/constructed: Location and address: Plot No./Door No.: Street: Survey No.: Town/City: Taluk: District: Total area of the plot: Plinth area in the case of the flat: Built in area of the house/plot: Market Value: Whether plan for construction has been approved / sanctioned by appropriate authority : Yes / No (copy of approved plan to be enclosed) Whether plot/property is free of encumbrance : Yes / No (Legal opinion on the property is to be obtained before sanction of loan from Bank s Approved Lawyer) If the construction / acquisition is made through a Co-operative Society/Association whether the bye-laws of the Society/Association are submitted : Yes / No Age of the house (for purchase of already built house/flat): 16. Details of third party guarantee (If the loan amount exceeds Rs. one lakh) Name & Address: Occupation : 25

26 Worth 17.How the cost is going to be met Total cost of construction : Rs. : Rs. (Estimate/valuation report from the Bank approved Engineer is to be submitted for construction/ acquisition) Margin money Loan Amount required Repayment period required : Rs. : Rs. : 180 months / 240 months 1. I agree to offer the proposed Dwelling Unit as prime security for the loan. 2. I will take care the assets created out of the bank loan & promise you to repay the loan installment promptly. 3. I/We hereby declare that the particulars given above are true and correct to the best of my / our knowledge and belief. 4. I hereby authorize the Bank to claim the eligible Interest Subsidy and credit the same to my loan account. 5. It will be in order for the bank to disqualify me / us from receiving any credit facilities from the bank in case it is proved that any of my / our declarations turns out to be false / i Place: Date: Signature Applicant(s) Encl: Copies of 1. Family Ration card 2. Copy of Voter s ID card 3. Copy of Patta / Title Deed / Approved Plan 4. Copy of Income Certificate issued by Competent Authority PART -B REVIEW NOTE: 1 SLRM 2009 Report on the follow up action on the decision of SLRM 2008 held on GROUP III 26

27 Waiver of Stamp duty for the documents of SHG: Waiver of Stamp duty for SHG documents may be recommended to the State Govt. by the SLBC. Tamil Nadu Corporation for Development of Women Ltd have advised that Government of Tamil Nadu have issued GO No.158 dated exempting the following instruments / documents executed by SHGs / Panchayat Level Federations (PLFs) promoted by Rural Development & Panchayat Raj Department from duty chargeable under Indian Stamp Act, Instruments of Agreement for Finance Inter se Agreement among members Deed of Hypothecation Deed of Mortgage executed by SHGs Copy of the GO No.158 dated has been circulated to Member Banks vide SLBC letter dated Member Banks are requested to take note of the remission of stamp duty. 27

28 REVIEW NOTE: 2 SLRM:2009 Special Agenda: 1 Panchayat Level Federations (PLF) Grading of PLFs & PLF Credit Guidelines. A) MD, TNCDW Ltd has advised that Government of Tamil Nadu vide their GO dated ordered for restructuring of the PLFs with the objective of making them more inclusive, transparent, participatory and to improve their governance and sustainability. Government of Tamil Nadu vide GO MS No.465 RD & PR (CGS 3) dated and letter dated have issued the parameters for grading the PLF. Accordingly, The grading will be done in a 100 point scale consisting of 7 parameters. On completion of 6 months from restructuring, the PLF becomes eligible for grading. PLF Grading will be an independent exercise carried out by a team consists of two community professionals, one representative from bank and one Assistant Project Officer, Mahlir Thittam / Assistant Project Manager or Team leader, VKP as the Convenor. The above GOs are furnished in the annexure. Member Banks are requested to take note of the same. B) MD, TNCDW has also forwarded the draft credit guidelines based on the workshop held on furnished in the annexure. The forum may deliberate and accord its approval. 28

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36 Draft PLF Credit Guidelines 1. Mahalir Thittam: The SHG movement, which was started in 1989 in a small way, has emerged as a powerful and vibrant movement spread over the length and breadth of the state. As on there are 4,15,573 SHGs under Mahalir Thittam. Mahalir Thittam, is implemented in partnership with Non-Governmental Organisations (NGOs) and Banks. A SHG is a small homogeneous group of poor women consisting of 12 to 20 members voluntarily formed to promote savings and mutually agreeing to contribute a common fund to be lent to its members as per the group s decision. The members have to be in the age group of years. The great merit of the SHG is its ability to inculcate among its members sound habits of thrift, savings and banking. SHGs have been recognised as useful vehicles to help the poor in accessing financial resources not available to them previously and help them break away from the grip of exploitative moneylenders. One of the primary reasons for the success of the SHGs has been their excellent track record of repayment of loans. The SHGs in existence for 6 months become eligible for credit rating. Those SHGs, which have passed credit rating successfully, become eligible for credit linkage. 1.1 World Bank-Aided Tamilnadu Empowerment and Poverty Reduction Project While Mahalir Thittam and other initiatives have been successful in mobilizing and forming SHGs of the poor, more efforts are required to Reach the poorest of the poor and vulnerable groups Strengthen existing SHGs to enhance their skills, capacities and resources to make them self-sufficient and self-reliant. 36

37 Provide financial resources and linkages required for generating significant increase in income of SHG members and thereby enhance their livelihoods. Promote greater interaction and stronger linkages among the SHGs and Gram Panchayats. With these objectives in mind and building on the strong foundation already laid by Mahalir Thittam, Tamil Nadu Empowerment and Poverty Reduction Project is being implemented with the World Bank assistance. This Project is a community driven development based project with shift in focus to livelihood promotion and economic empowerment. The project is implemented in 2517 village Panchayat in 70 backward blocks spread over 15 districts. 1.2 Panchayat Level Federations: The vision of the Mahalir Thittam is to reach out and empower women below poverty line through self reliant and sustainable grass root people s organisations. The success achieved in the project has prompted the State Government to further strengthen the movement and make it sustainable by forming federations of SHGs at Village Panchayat level PLF is a registered society of all functioning SHGs in a village Panchayat, promoted and managed for and by the member SHGs, for the attainment of their common goals of economic and social empowerment. The Panchayat Level Federation provides a common platform for the SHGs to share their experiences and to voice their problems. The PLF can help achieve what individual SHGs cannot, by pooling in their talents and resources and exploiting economies of scale both in production and marketing. They can also guide and monitor the functioning of SHGs in a Village Panchayat and also form and train new SHGs. Strengthening PLFs is the key to achieving sustainability of the SHG movement in the long run 37

38 1.2.1 Membership in PLF: SHGs in the village Panchayat which are 6 months old and have passed the first credit rating are eligible to become members of PLF. All types of SHGs that are functioning as per norms (except youth SHGs) in a Village Panchayat irrespective of their promoters can become members of PLF Role of PLF: To empower the rural women, disabled and vulnerable. To train and build the capacities of SHGs. To monitor functioning of SHGs, facilitating credit linkages within Banks and repayment of loan, facilitating micro finance planning, grading, auditing of SHGs. To resolve conflict among SHGs or its members. To certify the claims made by NGOs for SHG formation, training and monitoring To provide other services including financial services to member SHGs like micro insurance etc. To borrow funds from national and international agencies and lend to member SHGs and repay the loan promptly. To take up all activities that would benefit the SHGs and their members without affecting the livelihood options of individual SHGs. To purchase, construct and maintain infrastructure facilities which would be required for fulfilling the aims and objects of the Society. To receive and manage common infrastructure facilities for the benefit of SHGs Institutional structure for the PLF: The federation of the SHGs will be at two levels i.e at habitational level and at Panchayat Level. ach habitation with atleast 5 SHGs will constitute a Habitation Level Forum (HLF) with representation from every credit rated SHG. 38

39 Each Village Panchayat with atleast 10 SHGs will have a Panchayat Level Federation. In case the number of SHGs in the Village Panchayat is less than 10 there will be no PLF and the SHGs may join the nearest PLF of their choice. The PLF will have an Executive Committee and a General Body. All the members of federated SHGs will constitute the General Body of PLF. Executive Committee of PLF will be constituted with representatives from Habitation Level Forums and both PLF and HLF will have office bearers to discharge their functions effectively Institutional Status: PLF is registered under Tamil Nadu Societies Registration Act, 1975 and renewed annually Capacity Building: The PLFs are imparted the following trainings through reputed Training Institutions in the State 1. PLF Governance : 3 days residential training Programme for the Office Bearers of PLF. 2. Financial management : 3 days residential training programme for the PLF Office Beares and Book keeper. 3. PLF EC members Training : 3 days training programme for PLF EC members 4. HLF Office Bearers Training : 2 days training programme for the HLF Office Bearers. 5. Training on Business Opportunities for PLFs 6. Exposure Visit to Office bearers 39

40 2. Bulk Loan for PLFs 2.1. Need for Bulk Loan: The primary objective of the PLF is to provide financial and non financial support and services to member SHGs thereby ensuring sustainability of the SHG movement. The financial intermediation by PLF has become very essential to minimize the impact of micro finance institutions who usually charge exploitative rates of interest The studies undertaken by TNCDW have revealed that the entire financial requirement of the SHG members particularly seasonal and special credit requirements are not being fully met. To bridge this gap and to provide an additional source of finance to the SHGs to borrow and support its members, PLFs are encouraged to take up financial intermediary role by availing bulk loan from banks. The PLF Bulk loan will result in financial empowerment of the community based organizations which will bring in sustainability in SHG movement 2.2. Advantages of PLF Loan Lower Transaction cost Simple documentation / procedure Higher Repayment rate Easier Supervision & transparent Targeted credit delivery to poor and downtrodden Better quality of lending Prompt repayment through effective peer pressure 2.3. Pre Sanction Appraisal and Eligibility criteria: The PLF should fulfill the following conditions to avail bulk loan. 40

41 The PLFs recognized by Tamil Nadu Corporation for Development of Women (TNCDW)/Tamil Nadu Vazhnthu Kattuvom Project (TNVKP), registered under Tamilnadu Societies Registration Act 1975, and are in existence for more than 6 months (from the date of restructuring). Completion of training by PLF office bearers on Governance and Finance Management The PLFs securing A (>80 marks) & B grade (>60 marks) in the PLF grading (Max 100 marks). Preparation and approval of annual credit plan based on requirement of the individual members of the member SHGs. 2.4 Grading: The Government vide G.O. Ms. No. 465 R.D & P.R. (CGS 3) Department, dated have issued the parameters for grading the PLF. The grading will be done in a 100 point scale consisting of 7 parameters. On completion of 6 months from restructuring, the PLFs become eligible for grading. PLF Grading will be an independent exercise carried out by a team consisting of two community professionals, one representative from bank and one Assistant Project Officer, Mahalir Thittam /Assistant Project Manager or Team leader, VKP as the convener. Successfully graded PLFs become eligible for financial linkage 2.5. Assessment of credit: Requirement of individual members will be assessed and consolidated at SHG level. At the PLF level, it will be aggregated after taking into consideration, the quantum of the active loans availed by the SHGs. 41

42 The seasonal demands and the special requirement of the members of the constituent SHGs will be assessed and included in the PLF credit plan. Requirement of the default SHGs will not be included in the PLF credit plan 2.6. Fixing of credit limits: Credit limit should be based on proper need assessment of all SHGs in the PLF which should also cater to the entire seasonal demands in financial years. Adhering to the RBI norms the maximum active loan amount that an individual member will be able to access from SHG direct linkages/ Revolving Fund and PLF loan will be Rs.50,000/.-. PLF should obtain undertaking from member SHGs to this effect. However this limit may be exceeded, at the discretion of manager concerned. The present system of SHG interface with the banks is the most crucial tool for empowerment and hence this interface should continue. The current level of direct linkage and financing between the bank and the SHG will continue and if required, the quantum can be increased. The PLF bulk loan is an additional source of finance for SHGs and should not be construed as replacement for the present system of bank-shg linkage 2.7 Loan-Purpose: Purpose of the loan is left to the discretion of PLF. It may be used for a common / group activity or specific enterprise by individual SHGs/members. Number of SHGs/members to whom the loan is to be distributed is also left to PLF s decision. The loan may be utilised for economic activity or for consumption. 42

43 2.8 Lending Powers: It is left to the discretion of individual banks. However, the banks may consider delegation of sanctioning powers to Regional level Authorities of the respective banks to sanction PLF bulk loan irrespective of limits. This will facilitate quick processing of PLF bulk loan application. 2.9 Margin: No Margin is required irrespective of the quantum of loan (as applicable to SHG Bank linkage program). Subsidy is not being contemplated under the scheme Rate of Interest to PLF by the Bank: Interest chargeable to the PLFs will be as stipulated by NABARD / RBI to SHGs. The minimum RoI should be charged by banks to enable the PLFs to charge reasonable RoI from the member SHGs so that the ultimate interest charged will not be more than 15% p.a. Interest should be charged on monthly basis Types of Loan: Since most members will utilize SHG loans for rural farm and non-farm activities, which generate income at regular intervals, PLF bulk loan can be sanctioned as term loans. Bulk lending can be extended to the PLFs as Cash Credit facility also. 43

44 2.12 Security: Hypothecation of the Book debts/ receivables arising out of Bank loan shall be the Primary security. Hypothecation / assignment of fixed assets/ movable assets like building, Machinery, vehicles. Stocks, livestock etc created out of Bank loan shall be taken as security. PLF members and the members of constituent SHGs will be jointly /severally liable for the loan obtained by the PLF. No further collateral security is required 2.13 Credit documentation: Following documents have to be executed by the PLF for availing bulk loan from bank Primary document Application form (along with passport size photographs of office bearers of the PLF) signed by Secretary and Treasurer of PLF Sponsorship letter from Project Officer: Mahalir Thittam/ Project Manager: Vazhndu Kattuvom Project. Resolution passed by PLF Copy of registration under TN Societies Act 1975 & Bye Laws/ Rules and Regulations of the PLF. Copy of resolution from PLF seeking credit assistance to PLF with details of the requirements of the member SHGs. Copy of Grading Sheet of PLF 44