People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 49

December 04, 2011


AIDWA Demands Measures for Marginalised Women’s Credit Needs


ON November 24, a delegation of the All India Democratic Women’s Association (AIDWA) met, at the RBI office in Delhi, the committee set up to re-examine the existing classification and suggest revised guidelines with regard to the PSL classification and related issues. The delegation comprised AIDWA patron Brinda Karat, its general secretary Sudha Sundararaman, vice president T N Seema   (MP, Rajya Sabha), its Maharashtra state president Kiran Moghe, Odisha state vice president Tapasi Praharaj, and Delhi state treasurer Anju Jha.


The delegation of the AIDWA, a national level mass organisation with around 1.25 crore members, suggested a number of measures to ensure that the poor and marginalised women’s needs for credit are brought under the priority sector lending (PSL) categories. The committee gave a patient hearing to the delegation and assured that the issued raised would be examined seriously.




The delegation pointed out that as per the recommendations made in September 2005 by the Internal Working Group chaired by C S Murthy, the RBI had decided to “include only those sectors as part of the priority sector that impact large sections of the populations, the weaker sections and the sectors which are employment-intensive, such as agriculture, and tiny and small enterprises.” The categories of the priority sector include --- direct and indirect finance to agriculture, micro and small enterprises, micro-credit, educational loans and housing loans.


In this connection, the AIDWA’s demand is that women should be a separate sub-category under PSL. The organisation’s position is that women form an overarching category in the priority sector, whether as a ‘large section of the population’, or of the ‘weaker sections’ or as a part of the ‘employment intensive sectors of the economy,’ whether in agriculture or in micro-enterprises. However, women are not recognised as a separate category in the RBI guidelines on priority sector lending. Due to widely prevalent gender discriminatory attitudes and practices, women are rendered invisible even though they form a large part of the priority sectors, and, as a result, their credit needs are ignored.


For example, since women are not landowners, they do not qualify for agricultural loans, although in many households it is women who perform a large number of agricultural operations and also take related decisions. This is especially obvious in the case of women headed households. Similarly, it is necessary to know what proportion of credit reaches the women within the category of weaker sections like the SC and ST populations who are the most marginalized sections in society and are involved in income generating activities for which small loans are required. In case of educational loans and in the professions for which these loans have been given, we need to know how many girl students have availed of PSL loans. Similarly, it would be useful to know whether women are indeed able to avail of housing loans and what is the average size of such loans.




In this context, the AIDWA has put forward the following suggestions.


1) Loans to women within the categories and for the purposes of PSL should form a different sub-section.

2) This should be concretised through a policy that at least 30 per cent of the credit allocations for different sections in the PSL should flow to women within that specific category. This is in consonance with the policy of several programmes that have a mandatory quota of at least 30 per cent women in the list of beneficiaries.

3) At least 30 per cent loans in the micro and small enterprises category of collateral free loans up to Rs 10 lakh must be reserved for women. The definition must include the women in vending, other informal sectors, and home based workers. 

4) A monitoring mechanism must be set up under the PSL category to check the amount of funds being accessed by women.

The AIDWA delegation also pointed out that the single largest programme for women which requires credit is the movement of the self-help groups (SHGs) of women. Unfortunately, the experience has been that the initial encouragement given to this movement by the banking sector has waned considerably. This threatens the reversal of the gains, however small, made by women towards self-employment based income generation. Hence, the SHGs must form a large segment of the PSL.


The NABARD data indicate that the annual growth in the bank loans disbursed to SHGs during 2009-10 was only 17.9 per cent compared to the growth rate of 38.5 per cent in the previous year (2008-09). The NABARD guidelines regarding the sanction of savings linked loans by banks in the savings to loan ratio of 1:4 (and sometimes even beyond it) is not being followed.


Under the present guidelines, lending to SHGs is to be considered as a part of lending to weaker sections, within an overall limit of 10 per cent. It is essential to ensure that the bank disbursement to SHGs must be commensurate with the demand generated by millions of women organised in these SHGs.


The AIDWA demanded that given the excellent repayment rate of SHGs that has been well documented, SHGs must form a separate category of purpose of PSL which will help to enhance the quantum of credit available to them. 


A crucial factor is the rate of interest that is being charged by banks. At present, the interest rate applicable to loans given by banks to SHGs or member beneficiaries has been left to “their discretion.” As the current base rate of the commercial banks ranges between 9.5 and 10.75 per cent, and this is likely to rise further, the already high rates charged by banks from SHGs are likely to go up further. This will be detrimental to women creditors. Hence the AIDWA suggested that the guidelines must provide for loans at 4 per cent interest under the differential interest loan scheme.




A related issue is of the inclusion of micro finance institutions (MFIs) in the PSL category. Under the micro-credit category, the RBI has decided to continue with categorisation of bank loans to MFIs under PSL, provided they comply with certain conditions. In particular, bank credit for on-lending to individuals and Self-Help Groups (SHGs) and Joint Liability Groups (JLGs) qualifies for PSL credit. The AIDWA said it is opposed to such inclusion. The MFIs use the credit under PSL to give loans to women’s SHGs at much higher rates of interest. Thus women have to pay more than they would if they had direct access to bank loans. One of the arguments put forward to justify support to the MFIs is the poor banking network. While the AIDWA said strengthening of rural banking, e.g. through Grameen Banks must be a priority, there are other avenues and models which the banking system can follow to extend services to uncovered areas.


The bitter experience of women SHGs with MFIs was symbolised by the tragic suicides of women in Andhra Pradesh. But this is only the tip of the iceberg. Thousands of women SHGs across the country are victim to the coercive and criminal practices of the MFIs. Yet they still have no alternative to going to these new age exploitative moneylenders, precisely because of the banks’ indifferent attitude to giving them loans.


The AIDWA memorandum said it is extremely unfortunate that banks are choosing to lend more to MFIs rather than to SHGs. The quantum of bank loans disbursed to MFIs during 2009-10 more than doubled to Rs 8062 crore while the increase in bank loans to SHGs has comparatively slowed down.


The rate of interest to be charged by the MFIs has also been left to “their discretion.”


While the AIDWA welcomed the decisions regarding the interest cap, margin cap, and income limit of borrowers, these measures have been largely undermined by setting an exorbitantly high cap of 26 per cent per annum rate of interest. Studies show that a margin of 2 per cent is more than adequate for these institutions to cover their costs.


In this context, the AIDWA delegation demanded strict regulation of MFIs, their exclusion from the PSL category, and expansion of SHGs.




It has been said that loans to distressed persons other than farmers to prepay their debts to non-institutional moneylenders against appropriate collateral would be eligible for classification under the priority sector. As many women get indebted to moneylenders due to household emergencies, the AIDWA stands in favour of a scheme to assist them to prepay their debts. 


The AIDWA delegation also stressed the need of conducting impact evaluation studies of credit flows to different segments of priority sector lending.


There are virtually no data available on women’s access to priority sector credit. The only gender disaggregated data are for small borrowal account (for accounts with less than Rs 2 lakh limit). A comprehensive database must be maintained for all loans and advances made to women in different segments of PSL. It must be regularly monitored and the analysis must be utilised to enable banks to reach out to more and more women.


The AIDWA delegation also said there is a need to study and document the credit needs of women in different categories that have been identified as priority sector. It need not be assumed that they will be the same as that of men. 


The AIDWA team urged the committee to take into account the issues presented by it and incorporate appropriate changes into the policy guidelines. This would ensure that the interests of the large sections of women from the marginalised and deprived sections would be better served by the banking sector.