Q. Consider the following statements:

1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.

How many of the above statements are correct? (UPSC Prelims 2023)
Answer: Only two
Notes: The correct answer is [B] Only two. This question focuses on the evolution and operational structure of the Self-Help Group (SHG)-Bank Linkage Programme in India.

• Statement 1 (Incorrect): The SHG-Bank Linkage Programme was not initiated by the State Bank of India. It was launched by NABARD (National Bank for Agriculture and Rural Development) in 1992. While SBI and other banks later participated, the conceptualization and pilot project were driven by NABARD to connect the informal SHG sector with the formal banking system.
• Statement 2 (Correct): A core feature of the SHG model is joint liability. While an individual member may take a loan for specific needs (like a small business or health emergency), the entire group acts as a collective guarantee. The group as a whole is responsible for the timely repayment of the loan, which creates peer pressure and ensures high recovery rates.
• Statement 3 (Correct): SHGs are supported by a wide range of financial institutions, including Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), and Cooperative Banks. These institutions provide credit to groups once they have demonstrated regular savings and internal lending practices (usually after six months of formation).

The SHG movement has since been integrated into the National Rural Livelihoods Mission (NRLM), also known as Deendayal Antyodaya Yojana, to further scale up rural financial inclusion.