The Economic Times
Kolkata, 04 January 2018
SBI to Boost Lending to Farmers Under JLG Model, Joins Hands with Nabard
State Bank of India has teamed up with National Bank for Agriculture and Rural Development (Nabard) to grow its priority-lending book, as the country’s largest lender plans to raise its stake with small and medium farmers, most of whom do not have access to bank loans. The loans under this agreement will be given to small homogeneous groups of farmers carrying the joint liability to repay. Lending to joint liability groups (JLGs), pioneered by Nobel prize winner Muhammad Yunus of Bangladesh and implemented in India by microfinance companies such as Bharat Financial Inclusion or the likes of Bandhan Bank, is now an effective way of doing rural business for large private sector banks such as Axis Bank and HDFC Bank, helping them gain priority sector exposure directly.
“Having seen the success of private sector banks in lending through JLG, we thought public sector banks and regional rural banks should take the opportunity available in this space,” said GR Chintala, Nabard’s chief general manager of micro credit innovation department. JLGs are made up of 4-10 members who are engaged in similar economic activities, including farming. SBI is the first one to join hands with Nabard to promote the JLG method of lending to farmers at 7% interest. Nabard sanctions assistance for promotion of such groups through its partner NGOs. SBI, Nabard and five NGOs in West Bengal signed a tripartite agreement with a view to lend to 2,500 groups in the state, which is characterised by fragmented landholdings and low credit penetration. “Agricultural credit of commercial banks in this state is not up to the desired level. This initiative will help us to extend loans to the financially excluded sections, especially landless farmers,” said SBI chief general manager in Kolkata Partha Pratim Sengupta.