Correct option is B
The Self-Help Group-Bank Linkage Programme (SHG-BLP) initiated by NABARD (National Bank for Agriculture and Rural Development) is a flagship program aimed at financial inclusion by linking informal SHGs to formal banking systems. The pilot project resulted in the adoption of three radical innovations:
- Permission to lend to groups without specification of purpose/activity/project: Allowed flexibility in lending to SHGs, empowering them to choose their activities.
- Acceptance of informal groups as clients of banks: Recognized SHGs as valid entities for savings and credit services, making formal financial services more accessible to the rural poor.
- Introduction of collateral-free lending: Enabled SHGs to access credit without the requirement of traditional collateral, making banking accessible to those without assets.
However, "Avoidance of action in the event of defaults" is NOT one of the principles adopted under the program. While SHG-BLP promotes flexibility and trust-based lending, default management remains a critical aspect of ensuring repayment discipline. Banks and SHGs address defaults through group responsibility and mutual accountability, rather than avoidance of action.
Additional Information:
- The SHG-BLP program focuses on group-based lending to reduce credit risk and increase empowerment.
- As of recent years, the program has grown to be a pivotal mechanism for extending credit to rural areas.
Other Options:
- Permission to lend to groups without specification of purpose/activity/project: Correct; this was a key innovation to empower SHGs in decision-making.
- Acceptance of informal groups as clients of banks: Correct; this fostered financial inclusion for rural and marginalized groups.
- Introduction of collateral-free lending: Correct; this is a fundamental principle of SHG-BLP.
