State Bank of India has joined hands with National Bank for Agriculture & 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, a majority of whom do not enjoy the access of bank loans.
The loans under this agreement will be given to small homogeneous groups of farmers carrying joint liability to repay. Lending to joint liability groups (JLGs), pioneered by Nobel 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 to gain priority sector exposure directly.
JLGs consist 4-10 members who are engaged in similar economic activities including farming.
SBI is the first one to join hands with Nabard and its partner NGOs in West Bengal to promote JLG method of lending to farmers at 7% interest in the state, which is characterised by fragmented landholdings and low credit penetration.