Microfinance in Bihar: An Overview of Dakshin Bihar Gramin Bank

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Chapter-1
1. INTRODUCTION
1.1 A BRIEF INTRODUCTION
Microfinance is a general term to describe financial services to low-Income individuals or to

those who do not have access to typical banking services.
Microfinance is also the idea that low-income individuals are capable of lifting themselves
out of poverty if given access to financial services. While some studies indicate that micro-
finance can play a role in the battle against the poverty, it is also recognized that is not always
the appropriate method, and that it should never be seen as the only tool for ending poverty.
Microfinance is described as any activity that includes the provision of financial services such
as credit, savings and insurance to low income individuals which falls just above the nationally
defined poverty line, and poor individuals which fall below that poverty line, with the goal of
creating social value. The creation of social value includes poverty elevation and the broader
impact of improving livelihood opportunities through the provision of capital for micro
enterprise, and insurance and savings for risk mitigation and consumption smoothing. A large
variety of actors provide microfinance in Bihar, using a range of microfinance delivery
methods. Since the inception of DAKSHIN BIHAR GRAMIN BANK (erstwhile. MADHAYA BIHAR
GRAMIN BANK and BIHAR GRAMIN BANK) various actors have endeavoured to provide access
to financial services to the poor in creative ways. The government have also piloted national
programs, state programs, NGOs have undertaken the activity of raising donor funds for on-
lending, and some banks have partnered with public organisations or made small inroads
themselves in providing such services. This has resulted in a rather broad definition of
microfinance as any activity that targets the poor and low-income individuals for the provision
of financial services. The range of activities undertaken in microfinance include group lending,
Individual lending, the provision of savings and insurance, capacity building, and agricultural
business development services. Whatever the form of activity however, the overarching goal
that unifies all actors in the provision of microfinance is the creation of social value.
According to Marguerite S. Robinson “Microfinance refers to small scale financial services

for both credits and deposits- that are provided to people who farm or fish or herd; operate
small or micro enterprise where goods are produced, recycled, repaired, or traded; provide
services; work for wages or commissions; gain income from renting out small piece of land,
vehicles, draft animals, or machinery and tools; and to other individuals and local groups in
developing countries in both rural and urban areas”.
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1.2 OBJECTIVE OF THIS STUDY REPORT
 The objective of this study is to get an overview of Microfinance Industry in Bihar.
 To study and analyse the micro financial schemes of Dakshin Bihar Gramin Bank (DBGB).
 To understand the process of Microfinancing.
 To identify the factors responsible for loan defaults by clients of DBGB.
 To identify various ways by which the officers can ensure the repayment on time.
 To recommend options that DBGB can adopt to ensure on-time payment of loans.
 To identify the costs of loan defaults to DBGB and its implications to its sustenance.
 To study the effect of Microfinancing schemes on the Financial Performance of Dakshin

Bihar Gramin Bank.
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1.3 SCOPE OF THE STUDY
 The study is intended to analyse different micro financial schemes of Dakshin Bihar Gramin
Bank.
 It is planned to select Dakshin Bihar Gramin Bank as it is a newly constituted bank after the
amalgamation of Bihar Gramin Bank (sponsored by UCO bank) and Madhya Bihar Gramin
Bank (sponsored by Punjab National Bank).
 It is also planned to select Dakshin Bihar Gramin Bank because of it being a Regional Rural
Bank and it is constituted to serve the purpose of financial inclusion of deprived class and
poor into the banking system.
 Dakshin Bihar Gramin Bank as an RRB has a great scope for microfinance as they serve in
all those areas which are rural and poor.
 The study covers the assessment and analysis of the micro financial schemes of Dakshin
Bihar Gramin Bank.
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1.4 METHODOLOGY
 The present study is primarily based on the study of circular of various schemes related to
microfinance in DBGB.
 The present study also involves research based on observation of various processes and
working culture in Dakshin Bihar Gramin Bank.
 This study is secondarily based on Secondary Data- The data to be collected from Director’s
Annual Report of Dakshin Bihar Gramin Bank.
 The Study Involves Data collected During the Daily working and interaction with Credit
Department Members.
 Study also involves the analysis of hypothetical situations. (Hypothesis not included in the
project.0
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1.5 LIMITATIONS
 Employees being very busy in their work are unable to provide us with various details
regarding this study.
 Dakshin Bihar Gramin Bank being a newly amalgamated bank after the amalgamation of
Madhya Bihar Gramin bank and Bihar Gramin bank follows the schemes that were already
run by MBGB and no new schemes were introduced so as to broaden our scope of study.
 Dakshin Bihar Gramin Bank being only limited to South Bihar is unable to provide us with
data and trends related to various other areas and regions.
 We are not able to get all the data due to confidentiality problems.
 Being Stationed at Head Office we were not able to interact with customers or observe the
process directly.
 Dakshin Bihar Gramin Bank being a RRB and the study being related to Microfinance in
which Government is also a stake holder because of which various effects of these micro
financial schemes cannot be analysed.
 The study holds good only for the time period the project was undertaken.
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Chapter-2
2. Bank Profile
2.1 About ‘DAKSHIN BIHAR GRAMIN BANK’
Since DBGB is a Regional Rural Bank firstly we will know about RRBs. Regional Rural Banks are
Indian Scheduled Commercial Banks operating at regional level in different States of India. They
have been created with a view of serving primarily the rural areas of India with basic banking
and financial services. However, RRBs may have branches set up for urban operations and their
area of operation may include urban areas too.
Regional Rural Banks were established under the provisions of an Ordinance passed on 26th
September, 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for
agriculture and other rural sectors. The Regional Rural Banks are owned by the Central
Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor
the RRBs) who held shares in the ratios as follows Central Government – 50%, State
Government – 15% and Sponsor Banks – 35%.
Currently, RRB's are going through a process of amalgamation and consolidation. 25 RRBs have
been amalgamated in January 2013 into 10 RRBs. This counts 67 RRBs till the first week of June
2013. This counts 56 as of March 2015. On 31 March 2016, there were 56 RRBs (post-merger)
covering 525 districts with a network of 14,494 branches. All RRBs were originally conceived as
low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very
short time, most banks were making losses. The original assumptions as to the low cost nature
of these institutions were belied. This may be again amalgamated in near future. With the third
phase of amalgamation of RRB bringing down the number of such entities to 36 from 56. At
present there are 45 RRBs in India as on 01-04-2019.
Dakshin Bihar Gramin Bank Sponsored by Punjab national bank was established under regional
rural bank Act, 1976 and by govt. of India, Ministry of finance, Economic Affairs Banking Division
notification no. F. No. 7/8/2017 – RRB (Bihar) dated 21/12/2018 by amalgamating two RRBs in
the state of Bihar viz Madhya Bihar Gramin Bank (sponsored by Punjab National Bank) and Bihar
Gramin Bank (sponsored by UCO Bank) into a single RRB with its Head office at Patna.
The Bank is rendering its services to meet all the banking requirement of the rural and urban
areas. In the light of changed scenario in the banking sector. The bank is also providing its
services to the non-target group beneficiaries along with the target group beneficiaries.
After the merger of Bihar Gramin Bank and Madhya Bihar Gramin Bank, Dakshin Bihar Gramin
Bank has become the largest Regional Rural Bank in the country.
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Through its 13 Regional Offices and 1078 branches spread over 20 districts of Bihar, namely
Arwal, Aurangabad, Banka, Begusarai, Bhojpur, Bhagalpur, Buxar, Gaya, Jamui, Jehanabad,
Kaimur, Khagariya, Lakhisarai, Munger, Nalanda, Nawada, Patna, Rohtas, Samastipur &
Seikhpura, the bank is rendering its services effectively.
2.2 Major Achievement of DBGB performance during 2018-19
Data in Crores.
Progress from
Description MBGB BGB TOTAL 01.01.2019 – DBGB
31.03.2019
31-12-2018 DBGB 31-03-2019

Deposits 11579.42 5690.34 17269.76 1291.66 18561.42
CASA 7854.42 4062.83 11917.25 1135.6 13052.85
Advance 5457.02 3653.23 9110.25 457.84 9568.09
Total Business 17036.44 9343.56 26380 1749.51 28129.51
CD Ratio 47.13 64. 52.75 -1.2 51.55
PS Advance 5324.12 3429.53 8753.65 635.47 9389.12
Agri Advance 4306.13 2770.21 7076.34 649.46 7725.80
SF/MF 3483.85 2619.59 6103.44 -76.44 6027
Weaker Section 3674.97 2512.54 6187.51 313.47 6500.98
SHG(credit linked) 13727 11391 25118 31085 56203
KCC(No.) 22264 1933 24197 317 24514
NPA 1028.04 1341.75 2369.79 110.41 2480.20
Business Per Branch 24.27 24.85 24.47 1.62 26.09
Business Per Employee 5.75 5.81 5.77 0.51 6.2
CRAR 10.22 5.3 7.86 -2.01 5.85
No. of Branch 702 376 1078 0 1078
No. of Employee 2965 1608 4573 -99 4474
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2.3 BOARD OF DIRECTORS
Board of directors for MBGB AS ON 31.12.2018:
I. Sri Pranaya Kumar Mohanty ------ Chairman

II. Sri Balamurugan D. ------------------- IAS, Govt. of Bihar
III. Sri Sanvar Bharti ---------------------- IAS, Govt. of Bihar
IV. Sri Sudhir Dalal ----------------------- Circle Head, PNB
V. Dr. Ranajee Mehta -------------------- DGM, NABARD
VI. Sri Deepak Sharma ------------------- AGM, PNB
VII. Sri Sanjeev Kumar -------------------- AGM, RBI
Board of directors for BGB AS ON 31.12.2018:
I. Sri Perm Shankar Jha ---------------- Chairman

II. Sri Balamurugan D. ------------------- IAS, Govt. of Bihar
III. Sri Shiv Shankar Mishra -------------- Assistant Secretary, Govt. of Bihar
IV. Sri Sudhakar Satpathi --------------- DGM, UCO Bank
V. Sri D. H. Patwardhan ----------------- AGM, UCO Bank
VI. Sri D. K. Das ---------------------------- DGM, NABARD
VII. Smt Shruti Gautam ------------------- AGM, RBI
Dakshin Bihar Gramin Bank has been constituted w.e.f 01.01.2019 after amalgamation of Madhya
Bihar Gramin Bank and Bihar Gramin Bank as per gazette notification no. 5014 dated 21.12.2018.
After amalgamation Punjab national bank appointed Sri Pranaya Kumar Mohanty as chairman of
Dakshin Bihar Gramin Bank. As on 31-07-2019 Dr. Arif javed is the chairman of the bank and
following directors have been appointed by different stakeholders
I. Dr. Arif Javed -------------------------- Chairman

II. Sri Balamurugan D. ----------------- CEO Jeevika, Govt. of Bihar
III. Sri Amitabh Mishra ------------------ Joint Secretary Institutional Finance, Govt. of Bihar
IV. Sri D. K. Paliwal ---------------------- Zonal Manager, PNB Zonal Office Patna
V. Sri Sudhir Dalal ---------------------- Circle Head, PNB Circle Head Patna
VI. Dr. Ranajee Mehta ----------------- DGM, NABARD
VII. Smt Shruti Gautam ----------------- AGM, RBI
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Board of Directors for DBGB as on 31st July 2019

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2.4) MISSION & VISION

2.4.1) MISSION
“To be a leading bank in the commanding area of Bihar with all financial product at the
doorstep, catering to all the strata people in the pyramid with a paramount importance
on empowering women.”
2.4.2) VISION
“To make DBGB a super smart bank which is customer friendly, progressive, proactive,
technology savvy and where all services and product are made available at par with that
of commercial bank at affordable cost to the excluded for inclusive growth.”
2.5) SHARE CAPITAL

Regional rural bank (Amendment) Act, 2015 has been passed by the parliament and same had been
notified by govt. of India vide its gazette notification dated May 12, 2015. The provisions of the above
Act has been made operational vide gazette notification no. S.O 363(E) dated Feb 04, 2016. As per the
revised act the authorised share capital of the bank has been enhanced from ₹5.00 crores to ₹2000.00
crore. The total paid up capital of the bank as of March 31st, 2019 stands at ₹281.46 crore owned in the
ratio of 50:35:15 by Govt. of India, Punjab national bank and Govt. of Bihar respectively. The paid up
capital owned by the shareholders is owned as under:
Total Amount received from share holders

Particulars Sanctioned Govt. of Govt. of Punjab Total
Amount India Bihar National
Bank
a. Paid up capital 281.46 140.73 42.22 98.51 281.46
Share Capital
98.51, 35%
42.22, 15%
140.73, 50%
Govt. Of India Govt. Of Bihar Punjab National Bank

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DEPOSITS:
Deposit of our bank stood at ₹ 18561.42 crore as on March 31, 2019, as compared to ₹ 17269.76
crore as on January 01, 2019 registering a growth of 7.48% during 1st quarter after amalgamation.
PRIME DEPOSITS:
Prime deposits of the bank comprising of CASA formed 70.32% of total deposits as on March 31st,
2019.
2.6) KEY PERFORMANCE INDICATOR AS ON 31.03.2019:
PARTICULARS MARCH 31, 2019 JANUARY 01, 2019

Share Capital 281.46 281.46
Reserve 258.49 485.56
Deposits 18561.42 17269.76
Loans Outstanding 9568.09 9110.25
Refinance 3578.33 4434.90
Fresh Loan Issued 10897.44 6586.88
Investment SLR 8023.41 7417.41
Non-SLR 40.05 372.66
Total 8063.46 7790.07
Term Deposit with Banks 4449.87 4808.43
Profit(+)/ Loss(-) -240.21 0
NPA 2480.20 2369.79
Recovery (June position) June-18 June-18
1203.66 1203.66
37.62% 37.62%
C.D. Ratio 51.55 52.75%
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2.7) Balance Sheet as on 30-06-2019
DAKSHIN BIHAR GRAMIN BANK

Head Office: Shri Vishnu Commercial Complex
NH-30, New Bypass, Near BP Highway Services Petrol Pump
Ashochak, Patna-80001
Balance Sheet as on 30-06-2019/ तुलन-पत्र यथा दिनाांक 30.06.2019

(Rs.'000 Omitted)
PARTICULARS Schedule As on 30.06.2019 As on 31.03.2019
CAPITAL & LIABILITIES
Capital 1 2,814,696 2,814,696
Reserve & Surplus 2 2,584,872 2,584,872
Deposits 3 178,808,424 185,614,192
Borrowings 4 35,542,757 35,783,330
Other Liabilities and Provisions 5 3,524,585 2,333,826
Total 223,275,335 229,130,916
ASSETS
Cash & Balance with Reserve Bank of
India
6 8,681,312 8,743,676
Balance with Banks and Money at
7 48,157,736 46,731,666
call & short notice
Investments 8 74,319,082 80,634,667
Advances 9 84,536,589 84,870,900
Fixed Assets 10 493,920 472,291
Other Assets 11 7,086,696 7,677,716
Total 223,275,335 229,130,916
Contingent Liabilities 12 621,948 621,948
Bills for collection 308,587 86,476
Significant Accounting Policies 17
Notes on Accounts 18
The Schedules 1 to 18 form an integral part of the Accounts.
As per our report of even date
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2.8) Organisational structure of DBGB (HO)
2.8.1) Board of Directors
Board of Directors
SPONSOR State Govt. Central Govt.

RBI NABARD
BANK (PNB) Representative Representative
2.8.2) Organisational Hierarchy of DBGB (HO)
Board of
Director
Chairman
General General General

Manager 1 Manager 2 Manager 3
Department Department Department

Head Head Head
Officers Officers Officers
Office Office Office

Assistant Assistant Assistant
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2.9) Products
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Chapter-3
(Introduction to Micro-Finance)
3.1) Introduction
The financially weaker section, like the rest of society, need financial products and services to
build assets, stabilize consumption and protect themselves against risks. MF serves as the
last-mile bridge to the low-income population excluded from the traditional financial services
system and seeks to fill this gap and alleviate poverty.
Microfinance loans serve the low-income population in multiple ways by:
(1) Providing working capital to build businesses;
(2) Infusing credit to smooth cash flows and mitigate irregularity in accessing food, clothing,
shelter, or education; and
(3) Cushioning the economic impact of shocks such as illness, theft, or natural disasters.
Moreover, by providing an alternative to the loans offered by the local moneylender priced
at 60% to 100% annual interest, microfinance prevents the borrower from remaining trapped
in a debt trap which exacerbates poverty.
MF loans in India range in size from ₹50000 to ₹300000 per loan with interest rates typically
between 25% and 35% annually by MFIs and much below by banks i.e. 18 to 25 %.The MF
model is designed specifically to help the low income population overcome typical challenges
such as illiteracy, lack of financial knowledge and deficiency of collateralizable assets. At the
same time, the model takes advantage of existing community support systems and networks
to encourage financial discipline and ensure high repayment rates with an aim of creating
social value. The creation of social value includes poverty alleviation and the broader impact
of improving livelihood opportunities through the provision of capital for microenterprise,
and insurance and savings for risk mitigation and consumption smoothing.
A large variety of actors provide MF in India, using a range of MF delivery methods.

Governments have piloted national programs, NGOs have undertaken the activity of raising
donor funds for on-lending, and some banks have partnered with public organizations or
made small inroads themselves in providing such services.
The range of activities undertaken in microfinance include group lending, individual lending,
the provision of savings and insurance, capacity building, and agricultural business
development services. Whatever the form of activity however, the overarching goal that
unifies all actors in the provision of microfinance in the creation of social value.
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3.1.1) MICROFINANCE DEFINITIONS
According to Robinson, Marguerite.

“Microfinance refers to small-scale financial services for both credits and deposits — that are
provided to people who farm or fish or herd; operate small or microenterprises where goods
are produced, recycled, repaired, or traded; provide services; work for wages or commissions;
gain income from renting out small amounts of land, vehicles, draft animals, or machinery and
tools; and to other individuals and local groups in developing countries, in both rural and urban
areas”
According to International Labour Organization (ILO),
“Microfinance is an economic development approach that involves providing financial

services through institutions to low income clients”.
The Task Force on Supportive Policy and Regulatory Framework for Microfinance has
suggested a working definition of microfinance as:
"Provision of thrift, credit and other financial services and products of very small amounts to
the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and
improve living standards".
While exclusively covering the poor, it lays emphasis on graduating borrowers from pre-mE
stage to post mE stage. This graduation is done through financial and non-financial services.
The emphasis of support under mF is on the poor in 'pre-microenterprise' stage for building
up their capacities to handle larger resources. No specific limit for 'small' amount of financial
services is envisaged.
3.1.2) HISTORY/ORIGIN OF MICROFINANCE

There are 3 main factors that count to the bringing up of Microfinance as a Policy in India
1. The first of these pivotal events was Indira Gandhi’s bank nationalization drive launched in 1969
which required commercial banks to open rural branches resulting in 15.2% increase in rural bank
branches in India between 1973 and 1985.
2. The second national policy that has had a significant impact on the evolution of India’s banking and
financial system is the Integrated Rural Development Program (IRDP) introduced in 1978 and designed
to be ‘a direct instrument for attacking India’s rural poverty.’
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3. The last major event which impacted the financial and banking system in India was the liberalization
of India’s financial system in the 1990s characterized by a series of structural adjustments and financial
policy reforms initiated by the Reserve Bank of India (RBI).
The systems and procedures of banking institutions was emphasizing on complicated qualifying
requirements, tangible collateral, margin, etc., that resulted in a large section of the rural poor shying
away from the formal banking sector. The banks too experienced that the rapid expansion of branch
network was not contributing to an increasing volume of business to meet high transaction costs and
risk provisioning, which even threatened the viability of banking institutions and sustainability of their
operations. At the same time, it was not possible for them to allow a population of close to 300 million
- even if poor - to remain outside the fold of its business. The search for an alternative mechanism for
catering to the financial service needs of the poor was thus becoming imperative.
3.1.3) GROWTH OF MICROFINACE

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3.1.4) Development process through Microfinance

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3.2) MAJOR PLAYERS
The major players which were instrumental in the growth of microfinance industry in India
includes NABARD, SIDBI, Rashtriya Mahila Kosh, FWWB and SHARE Microfin Limited etc.
NABARD
NABARD was established in 1982 to provide credit to the rural sector. NABARD was a pioneer
in microfinance programs in India. The bank’s vision is “to facilitate sustained access to
financial services for the unreached poor in rural areas through various microfinance
innovations in a cost effective and in sustainable manner.” By 2005 NABARD SHG Bank linkage
programme had emerged as one of the largest microfinance programs in the world. NABARD
has also collaborated with NGOs, MFIs, banks and governmental agencies in order to use
other models of rural credit like the Grameen Model and the Individual Banking Model.
SIDBI
SIDBI Foundation for Micro Credit (SFMC) was launched by the Bank in January 1999 for
channelizing funds to the poor in line with the success of pilot phase of Micro Credit Scheme.
SFMC's mission is to create a national network of strong, viable and sustainable Micro Finance
Institutions (MFIs) from the informal and formal financial sector to provide micro finance
services to the poor peoples as well as specially serves the women.
RASHTRIYA MAHILA KOSH

In 1993, the Ministry of Human Resource Development, Government of India set up the
Rashtriya Mahila Kosh (RMK) with initial funding of Rs.310 million to act as a provider of
wholesale funds for the sector and to develop the sector through capacity building and
advocacy.
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Chapter-4
(Study of Micro financial Schemes)
Microfinance organisation is not new to the financial market in India. Due to the overwhelming
poverty in India, government gave special attention to the development of rural credit. Taking All
India Rural Credit Survey report (1950) into account, it reconstructed the cooperative structure
which included the partnership of state in cooperatives, establishment of Regional Rural Banks
(RRB) and National Bank for Agriculture and Rural Development (NABARD). In India, Non-
Government Organisations (NGOs) played a pivotal role in the development of micro financial
service. Furthermore, microfinance industry in India has witnessed a fast-paced growth in last two
decades. In 2009, the total number of microfinance institutions in India was around 150.
Microfinance Services Regulation Bill of India, defines microfinance services as financial assistance
to be provided to an eligible individual directly or by a group mechanism for:
 An amount of maximum fifty thousand in aggregate per person for small and cottage
enterprises, agricultural and allied activities (consumption purposes of the person is also
included) or
 A maximum amount of one lakh fifty thousand in aggregate per person for the purpose of
housing or
 Such like the above amounts may be prescribed to a person for other purposes also.
Dakshin Bihar Gramin Bank being a RRB is founded upon the principle duty of financial inclusion of
weaker sections and underprivileged class to the mainstream banking system and Curbing poverty
through uplifting the people’s income by various financial schemes. Dakshin Bihar Gramin Bank
has already in place various products for Micro Financial Loan for both Farm and non-farm sectors
under tie-up arrangement with various institution for URBAN Areas and for RURAL Areas.
Some of these Micro financial Schemes Include:
1) Micro Loan to JLG Members under Tie-up arrangement with BCO/BCA and model with
CDOT (Centre for Development Orientation and Training)
2) Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)
3) Micro Loan to JLG Members under Urban Financial Inclusion.
4) Micro Loan to JLG Members under tie up arrangement with NABARD approved NGOs
(JLGPIs) in Rural and Urban Areas
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4.1) Micro Loan to JLG Members under Tie-up arrangement with

BCO/BCA and model with CDOT (Centre for Development
Orientation and Training).
4.1.1) Background
Microfinance is the extension of very small loans (micro loans) to under privileged
borrowers who typically lack Collateral regular employment and demonstrable Credit
History. It is customized not only to support entrepreneurship and alleviate poverty but
also to empower poor and uplift the communities by extension of financial services.
The JLG approach is a major product propagated by NABARD for purveying microfinance
for meeting the credit needs of Small/Marginal farmers/Tenant/Oral
lessees/landless/share croppers as well as existing micro enterprises for Income
generating activities in both Farm sectors and Non-Farm sectors activities for both
URBAN and RURAL areas, to enhance opportunities for livelihood in terms of income
and employment by making available collateral free, hassle less credit through the
Banking system where the recovery is attempted as ensured. The JLG product plays a
vital role in covering the excluded farmers/micro-enterprises in the fold of banking
system.
Banks have to take JLG financing as means of building a profitable business portfolio and
have to invest substantial time and resources maintaining constant touch with JLG
members for enabling close follow-up, monitoring of end uses of loan, ensuring high
recoveries thereby maintaining quality portfolio. NABARD guidelines on financing of
JLGs through RRBs inter-alia envisaged engagement of Identified NGOs to act as Joint
Liability Group Promoting Institutions (JLGPIs). The above means provide bank not only
to increase the credit flow to the targeted population, but can also improve bank’s
overall asset quality in JLG FINANCING.
As per RBI guidelines, loan to such sections of borrowers are categorized as Priority
Sector Lending. The product provides for an opportunity to extend the financial
assistance to the rural/urban population through JLG MODE to increase the customer
base of the Bank and increase in its Priority Sector Lending as well.
4.1.2) Features of the Scheme:
S. No. Features Details

1 Target Clientele  To cater the credit needs of Small/marginal
Farmers/ Tenant/ Oral lessee/Landless/share
croppers capable/having scope of forming viable
JLG groups in RURAL areas.
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 Loan for all monthly/regular income generating

Non- Farm activities irrespective of household
income criteria in RURAL and URBAN areas.
 Micro enterprises which are Capable/having scope
of forming viable JLG groups in RURAL and URBAN
AREAS.
 Salaried persons and Non-PSL activities are not
eligible for this scheme.
2 Eligibility Criteria  Age: Min. 18 years
Max. 65 years (at maturity of the loan).
 JLG group would consist of four to five persons.
3 Nature (i) Each JLG will consist of 4 to 5 members of similar/
comparable / homogeneous background of same
village/ location/ area.
(ii) Financing will be made to the individual members
of the JLG for any viable projects under eligible
activities under FARM/Non-Farm Sector within
maximum amount applicable as per respective
CYCLE as given below.
(iii) In a Particular JLG, activities under financing should
be homogenous as for as possible. Members of the
same family cannot become member of the same
JLG under financing.
(iv) Mode of Financing will be Term Lending (T/L) or
Working Capital Term Loan (WCTL) as per
suitability.
(v) Individual applications / annexures (if required) vis-
a-vis individual documentation for every member
of the JLG as per scheme has to be obtained. Inter-
se-agreement being executed by all the members
of the same JLG must be obtained and kept in
individual document sets. All such individual
document-set of the same JLG will be kept together
preferably in one cover file till closure of all the
individual loan A/Cs of the same JLG for readiness
of reference.
(vi) Name of each JLGs and Individual borrower
member should be separately maintained in the
village wise register mentioning name of activity
and amount of loan sanctioned / disbursed.
(vii) All the activity accounts in a JLG group, which will
be financed for the 1st time i.e., in cycle I, will have
to demonstrably run the unit at least for a
continuous period of 12 months where closure of
any of accounts will not be acceptable before 12
months for becoming eligible for the next cycle i.e.,
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2nd cycle or similarly onwards for the 3rd cycle,

provided further, That there will be no gap of EMI
in any of the above such 12 months since inception
i.e., the 1st month.
(viii) However in situation where member/members
wants to close the accounts before 12 months at
any point of time due to his own
compulsions/desire, such member or members will
not be eligible for the 2nd cycle, nor will be eligible
to form another new JLG before 12 months from
the date of loan of previous JLG account having
closed before 12 Months.
(ix) In situation where member/members who have
completed this minimum 12 months clause of unit
continuity/and EMI consistency may be eligible for
financing under cycle II in a JLG to be formed with
other such members so eligible for cycle II. The
same method will be applicable in cases of
financing under cycle III also.
4 Amount of Loan/ Micro Loan: In the form of Term Loan/WCTL in 03
Facility & Repayment Cycles (1st Cycle 2ndCycle 3rdCycle).
1st Cycle – Max ₹ 20000/- per member of JLG

2ndCycle – Max ₹ 30000/- per member of JLG
3rdCycle – Max ₹ 40000/- per member of JLG
Repayment: 18 Months 24 Months 30 Months

(w.e.f. immediate next month) Monthly interest
Amt. and principal Instalment (as per cycle) will be
paid on monthly basis i.e. EMI + other charges.
5 Security& Insurance Primary: Asset created out of Bank finance will be
of assets financed hypothecated to the Bank by virtue of the
declaration in the application form. Creation of
Security and its intactness would be ensured by
concerned BCA/BCO.
Collateral: Nil
Guarantee: Other members of the group shall give
guarantee to each other through Inter-se-
Agreement. Assets created out of loan will be
comprehensively insured as per prevalent practice
of the bank and cost of insurance will be
recovered/added to concerned EMI.
6 Margin Nil.
7 Pricing 14.00% p.a.
24 | P a g e
8 Interest Servicing Interest to be serviced monthly, as per the

convenience of the borrower through equated
monthly instalment.
9 Processing Fee Processing Fee: Nil Documentation
Documentation Charges: Nil
Charges: Stamp duty as applicable will be required.
10 Others: Commission Commission and other Grants payable to BCOs
and other Grants 1. The support from NABARD in terms of grants
payable to BCOs. assistance to Banks for passing on to corporate
NGO-JLGPIS for formation, nurturing and financing
of New JLGS @ Rs.2000/- per JLG as per NABARD
business model on financing of JLGs through RRB
vide letter no. NB.Bihar/mCID1034/mCID-33/2017-
18 dated 07 July 2018.
i) First instalment of Rs.1,000/- would be released

after disbursement of loan by the bank.
ii) Second instalment of Rs.500/- would be
released after one year from the date of loan of
disbursement subject to certification that the
loan repayment is regular / without default by
all the individual members of the JLG.
iii) Third instalment of Rs.500/- would be released
on closure of the loan account by all members of
JLG or after the end of second year from the date
of loan disbursement subject to similar
certification, whichever is early. 2. No
commission will be paid to the CDOT for the A/C
or accounts under a JLG which has not run at
least for a period of 12 Months under any cycle.
Provided further that each month of such 12
Months must have records of recovery of an
amount not less than the EMI amount plus other
charges so fixed in the beginning of the loans. 3.
The claim/bill shall be raised on monthly basis by
NGOs as per law of land and to be submitted to
Head Office by 15th of successive month.
4. The payment shall be made by the Head Office

after verifying the recovery records of each JLG
accounts as per Details of para 11 through
NEFT/RTGS in the account of CDOT.
5. CDOT will also maintain their own data base to

avoid multiplicities of membership of the same
25 | P a g e
person in different group and for further reference

for switching over from cycle I to II to III onwards.
4.1.3) Sanction & Disbursement:
Sanction: Sanction will be done by Branch Manager keeping in view the delegated
loaning power of respective scale as per the extant loaning power guidelines of the bank.
Disbursement: In case of Term Loan - Loan amount will be disbursed through Saving
Bank account with DBGB of individual JLG borrowers. Disbursement will be in single
instalment and part disbursement is not permitted.
26 | P a g e
4.2) Deendayal Antyodaya Yojana-National Rural Livelihoods

Mission (DAY-NRLM)
4.2.1) Background
1.1) The Ministry of Rural Development, Government of India launched a new
programme known as National Rural Livelihoods Mission (NRLM) by restructuring
and replacing the Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme with effect
from April 01, 2013. Detailed ‘Guidelines’ were circulated to all Scheduled
Commercial Banks including Regional Rural Banks vide RBI circular
RPCD.GSSD.CO.No.81/09.01.03/2012-13 dated June 27, 2013. NRLM was renamed
as Deendayal Antyodaya Yojana – National Livelihoods Mission (DAY-NRLM) with
effect from March 29, 2016.
1.2) DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction
through building strong institutions of the poor, particularly women, and enabling
these institutions to access a range of financial services and livelihood services. DAY-
NRLM is designed to be a highly intensive program and focuses on intensive
application of human and material resources in order to mobilize the poor into
functionally effective community owned institutions, promote their financial
inclusion and strengthen their livelihoods. DAY-NRLM complements these
institutional platforms of the poor with services that include financial and capital
services, production and productivity enhancement services, technology,
knowledge, skills and inputs, market linkage, etc. The community institutions also
offer a platform for convergence and partnerships with various stakeholders by
building environment for the poor to access their rights and entitlements and public
service.
1.3) A women’s Self-Help Group (SHG), coming together on the basis of mutual affinity
is the primary building block of the DAY-NRLM community institutional design.
DAYNRLM focuses on building, nurturing and strengthening the institutions of the
poor women, including the SHGs and their Federations at village and higher levels.
In addition, DAY-NRLM promotes livelihood institutions of rural poor. The mission
provides a continuous hand-holding support to the institutions of poor for a period
of 5 – 7 years till they come out of abject poverty. The community institutional
architecture put in place under DAY-NRLM will provide support for a much longer
duration and of a greater intensity.
1.4) The support from DAY-NRLM includes all round capacity building of the SHGs
ensuring that the group functions effectively on all issues concerning their
members, financial management, providing them with initial fund support to
address vulnerabilities and high cost indebtedness, formation and nurturing of SHG
federations, making the federations evolve as strong support organizations, making
livelihoods of the poor sustainable, formation and nurturing of livelihoods
organizations, skill development of the rural youth to start their own enterprises or
27 | P a g e
take up jobs in organized sector, enabling these institutions to access their

entitlements from the key line departments, etc.
1.5) The implementation of DAY-NRLM has been in a Mission Mode since April, 2013.
DAY-NRLM adopts a demand driven approach, enabling the States to formulate
their own State specific poverty reduction action plans. DAY-NRLM enables the
State rural livelihoods missions to professionalize their human resources at State,
district and block level. The State missions are capacitated to deliver a wide range
of quality services to the rural poor. DAY-NRLM emphasizes continuous capacity
building, imparting requisite skills and creating linkages with livelihoods
opportunities for the poor, including those emerging in the organized sector and
monitoring against targets of poverty reduction outcomes. The blocks and districts
in which all the components of DAY-NRLM will be implemented, either through the
SRLMs or partner institutions or NGOs, will be the intensive blocks and districts,
whereas remaining will be non-intensive blocks and districts. The selection of
intensive districts are done by the states based on the demographic vulnerabilities.
It will be rolled out in a phased manner over the next 7 - 8 years.
4.2.2) Financial Assistance to the SHGs
2.1) Revolving Fund (RF): DAY-NRLM would provide Revolving Fund (RF) support to SHGs in
existence for a minimum period of 3/6 months and follow the norms of good SHGs, i.e.
they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal lending,
regular recoveries and maintenance of proper books of accounts. Only such SHGs that
have not received any RF earlier will be provided with RF, as corpus, with a minimum of
10, 000 and up to a maximum of 15,000 per SHG. The purpose of RF is to strengthen
their institutional and financial management capacity and build a good credit history
within the group.
2.2) Capital Subsidy has been discontinued under DAY-NRLM: No Capital Subsidy will be
sanctioned to any SHG from the date of implementation of DAY-NRLM.
2.3) Community Investment Support Fund (CIF) CIF will be provided to the SHGs in the
intensive blocks, routed through the Village level/ Cluster level Federations, to be
maintained in perpetuity by the Federations. The CIF will be used, by the Federations,
to advance loans to the SHGs and/or to undertake the common/collective socio-
economic activities.
2.4) Introduction of Interest subvention: DAY-NRLM has a provision for interest subvention,
to cover the difference between the Lending Rate of the banks and 7%, on all credit from
the banks/ financial institutions availed by women SHGs, for a maximum of 3,00,000 per
SHG. This will be available across the country in two ways:
2.4.1) In 250 identified districts, banks will lend to the women SHGs @7% up to an
aggregated loan amount of 3,00,000/-.The SHGs will also get additional interest
28 | P a g e
subvention of 3% on prompt payment, reducing the effective rate of interest to

4%.
2.4.2) In the remaining districts also, all women SHGs under DAY-NRLM are eligible for
interest subvention to the extent of difference between the lending rates and 7%
for the loan up to 3,00,000, subjected to the norms prescribed by the respective
SRLMs. This part of the scheme will be operationalized by SRLMs.
4.2.3) Lending Norms

S. No. Feature Detail
1 Eligibility criteria for the  SHG should be in active existence at least since
SHGs to avail loans the last 6 months as per the books of account of
SHGs and not from the date of opening of S/B
account.
 SHG should be practicing ‘Panchasutras’ i.e.
Regular meetings; Regular savings; Regular
inter-loaning; Timely repayment; and Up-to-
date books of accounts;
 Qualified as per grading norms fixed by NABARD.
As and when the federations of the SHGs come
to existence, the grading exercise can be done by
the Federations to support the Banks.
 The existing defunct SHGs are also eligible for
credit if they are revived and continue to be
active for a minimum period of 3 months
2 Loan amount Emphasis is laid on the multiple doses of assistance
under DAYNRLM. This would mean assisting an SHG
over a period of time, through repeat doses of credit, to
enable them to access higher amounts of credit for
taking up sustainable livelihoods and improve on the
quality of life.
SHGs can avail either Term Loan (TL) or a Cash Credit
Limit (CCL) loan or both based on the need. In case of
need, additional loan can be sanctioned even though
the previous loan is outstanding.
The amount of credit under different facilities should be

as follows:
Cash Credit Limit (CCL): In case of CCL, branches are
advised to sanction minimum loan of ` 5 lakhs to each
eligible SHGs for a period of 5 years with a yearly
drawing power (DP). The drawing power may be
enhanced annually based on the repayment
29 | P a g e
performance of the SHG. The drawing power may be

calculated as follows:
 DP for First Year: 6 times of the existing
corpus or minimum of 1 lakh whichever is
higher.
 DP for Second Year: 8 times of the corpus at the
time review/ enhancement or minimum of 2
lakh, whichever is higher.
 DP for Third Year: Minimum of lakhs based on
the Micro credit plan prepared by SHG and
appraised by the Federations /Support agency
and the previous credit History.
 DP for Fourth Year onwards: Minimum of 5 lakhs
based on the Micro credit plan prepared by SHG
and appraised by the Federations /Support
agency and the previous credit History.
Term Loan: In case of Term Loan, branches are
advised to sanction loan amount in doses as
mentioned below:
 First Dose: 6 times of the existing corpus or
minimum of 1 lakh whichever is higher.
 Second Dose: 8 times of the existing corpus or
minimum of 2 lakh, whichever is higher
 Third Dose: Minimum of 3 lakhs based on the
Micro credit plan prepared by the SHGs and
and the previous credit History
 Fourth Dose: Minimum of 5 lakhs based on the
Micro credit plan prepared by the SHGs and
and the previous credit History.
3 Security and Margin No collateral and no margin will be charged up to 10.00
lakhs limit to the SHGs. No lien should be marked
against savings bank account of SHGs and no deposits
should be insisted upon while sanctioning loans
4 Dealing with Defaulters It is desirable that wilful defaulters should not be
financed under DAY-NRLM. In case wilful defaulters are
members of a group, they might be allowed to benefit
from the thrift and credit activities of the group
including the corpus built up with the assistance of
Revolving Fund. But at the stage of accessing bank loan
by SHG for financing economic activities by its members,
the wilful defaulters should not have the benefit of such
bank loan until the outstanding loans are repaid. Wilful
defaulters of the group should not get benefits under
30 | P a g e
the DAY-NRLM Scheme and the group may be financed

excluding such defaulters while documenting the loan.
However, banks should not deny loan to entire SHG on
the pretext that spouse or other family members of
individual members of SHG being a defaulter with the
bank. Further, non-wilful defaulters should not be
debarred from receiving the loan. In case default is due
to genuine reasons, Branches may follow the norms
suggested for restructuring the account with revised
repayment schedule.
4.2.4) Interest subvention scheme for Women SHGs
i. All women SHGs will be eligible for interest subvention on credit up to 3 lakhs at 7% per
annum. SHG availing capital subsidy under SGSY in their existing credit outstanding will
not be eligible for benefit under this scheme.
ii. The Commercial Banks and Cooperative Banks will lend to all the women SHGs at the rate
of 7% in the 250 districts. Annex III provides the names of the 250 districts.
iii. All Commercial Banks (excluding RRBs) will be subvented to the extent of difference
between the Weighted Average Interest Charged (WAIC as specified by Department of
Financial Services, Ministry of Finance) and 7% subject to the maximum limit of
5.5%.This subvention will be available to all the Banks on the condition that they make
SHG credit available at 7% p.a. in the districts.
iv. RRBs and Cooperative Banks will be subvented to the extent of difference between the
maximum lending rates (as specified by NABARD) and 7% subject to the maximum limit
of 5.5%. This subvention will be available to all RRBs and Cooperative Banks on the
condition that they make SHG credit available at 7% p.a. in the 250 districts. RRBs and
Cooperative Banks will also get concessional refinance from NABARD. Detailed
guidelines for RRBs and Cooperative Banks will be issued by NABARD.
v. Further, the SHGs will be provided with an additional 3% subvention on the prompt
repayment of loans. For the purpose of Interest Subvention of additional 3% on prompt
repayment, an SHG account will be considered prompt payee if it satisfies the following
criterion.
31 | P a g e
4.3) Micro Loan to JLG Members under Urban Financial Inclusion.
4.3.1) Background
Microcredit is the extension of very small loans (micro loans) to underprivileged borrowers who
typically lack Collateral regular employment and a demonstrable Credit History. The product
herewith is customized not only to support entrepreneurship and alleviate poverty, but also to
empower poor and uplift communities by extension of financial services. Banks extend micro
loans to the economically poor section including small and marginal farmers, artisans, landless
labourers etc. to fulfil the funding needs of their business, education, health, other household
related expenses and repaying of high cost debt, etc. As per RBI guideline, the loan to these
sections of borrowers is categorized as Priority Sector Lending. The product provides an
opportunity to extend the financial assistance to the rural/urban population through JLGs mode
to increase the customer base besides increasing its Priority Sector Lending.
4.3.2) Features of the Product

S No. Features details
1 Target Clientle  JLGs for all income generating activities
irrespective of household income criteria.
 Not to offer to salaried borrowers and for Non-
PSL activities.
2 Eligibility Criteria  Age: Min.18 years, Max. 65 years (at maturity
of the loan).
 JLG group should not more than five members
3 Nature of Product  Term Loan
 Overdraft on monthly reducing Drawing Power
(DP) basis.
4 Loan Tenure &  In case of Term Loan will be repay in 10 equal
Repayment Period monthly instalment (EMI)
 In case of Over Draft -Monthly Interest Amount
and Principal Instalment (Max.10 month) will
be paid on monthly basis.
5 Amount of Loan Facility  Maximum up to Rs.15000/- to each individual
members of JLGs
6 Security  Primary: Asset created out of Bank finance will
be hypothecated to the Bank by virtue of the
declaration in application form.
 Collateral: Nil
32 | P a g e
 Guarantee: Other members of the group shall

stand guarantee to each other through Inter-
se-Agreement.
7 Margin  Nil.
8 Pricing  BPLR - 2% p.a. (BPLR at present@ 14% p.a.)
work out to be 12% p.a. at present.
9 Interest Servicing  Interest to be serviced monthly, as per the
monthly instalment.
10 Fresh limit to existing  In case of Term Loan- Loan Account will be fully
loanee/Renewal of adjusted within 10 month from loan
Account disbursement. Fresh limit can be sanction.
 In case of Over Draft – Account will be renewed
after 10 month from loan disbursement.
Note- Next Over draft facility may be sanction on
repayment of earlier loan in full disbursed not prior
than 7 month of previous loan completion.
33 | P a g e
4.4) Micro Loan to JLG Members under tie up arrangement with

NABARD approved NGOs (JLGPIs) in Rural and Urban Areas
The JLG approach is a major product propagated by NABARD for purveying microfinance in rural
India for meeting the credit needs of Small/Marginal farmers/Tenant/Oral
lessees/landless/share croppers as well as existing micro enterprises for Income generating
activities in both Farm sector and Non-Farm sectors activities for RURAL areas, to enhance
opportunities for livelihood in terms of income and employment by making available collateral
free, hassle less credit through the Banking system where the recovery is attempted as ensured.
The JLG product plays a vital role in covering the excluded farmers/micro-enterprises in the fold
of banking system.
Banks have to take JLG financing as means of building a profitable business portfolio and have
to invest substantial time and resources maintaining constant touch with JLG members for
enabling close follow-up, monitoring of end uses of loan, ensuring high recoveries thereby
maintaining quality portfolio. The Banks can not only increase the credit flow to the targeted
population, but can also improve their overall asset quality in JLG FINANCING. As per RBI
guideline, loans to such sections of borrowers are categorized as Priority Sector Lending. The
product provides for an opportunity to extend the financial assistance to the rural/urban
population through JLG MODE to increase the customer base of the Bank and increase in its
Priority Sector Lending as well.
4.4.1) Features of the Product

Sl.No. Feature Detail
1 Target Clientele  To cater the credit needs Small/marginal
Farmers/ Tenant/ Oral lessee/Landless/share
croppers and
Micro enterprises which are capable/having
scope of forming viable JLG groups in RURAL
and URBAN areas.
 All other Income Generating purpose
irrespective of household Income Criteria.
 Salaried persons and Non-PSL activities will not
be covered. 2
2 Eligibility Criteria  Age: Min.18 years, Max. 65 years (at maturity
of the loan).
 JLG group would consist of four to five persons.
3 Nature of Product i) Each JLG will consist of 4 to 5 members of
similar/ comparable / homogeneous
background of same village/ location/ area.
ii) Financing will be made to the individual
members of the JLG for any viable projects
under eligible activities under Farm and Non-
34 | P a g e
Farm Sector within maximum limit as given

below.
iii) In a Particular JLG, activities under financing
should be homogenous as for as possible.
Members of the same family cannot become
member of the same JLG under financing.
iv) Mode of Financing will be Term Lending (T/L)
or Working Capital Term Loan (WCTL) as per
suitability.
v) Individual applications / annexures (if
required) vis-a-vis individual documentation
for every member of the JLG as per scheme has
to be obtained. Inter-se-agreement being
executed by all the members of the same JLG
must be obtained and kept in individual
document sets. All such individual document-
set of the same JLG will be kept together
preferably in one cover file till closure of all the
individual loan A/Cs of the same JLG for
readiness of reference.
vi) Name of each JLGs and Individual borrower
member should be separately maintained in
the village wise register mentioning name of
activity and amount of loan sanctioned /
disbursed.
4 Amount of Loan/ Facility &  Micro Loan: In the form of Term Loan/WCTL.
Repayment  Quantum of Loan:
Minimum – Rs.20,000/-
Maximum – Rs.50,000/-
 Repayment Period:
 Minimum - 18 Months
 Maximum - 30 Months
(w.e.f. immediate next month) Monthly
interest Amt. and principal Instalment (as per
cycle) will be paid on monthly basis i.e., EMI +
Other charges.
5 Security & Insurance of  Primary: Asset created out of Bank finance is
assets financed hypothecated to the Bank by virtue of the
declaration in application form. Creation of
security and its intactness is ensured by
concerned BCA/BCO.
 Collateral: Nil
 Guarantee: Other members of the group shall
give guarantee to each other through Inter-se-
Agreement.
 Assets created out of loan will be
comprehensively insured as per prevalent
35 | P a g e
practice of the bank and cost of insurance will

be recovered/added to concerned EMI.
6 Pricing  12 % per Annum
7 Interest Servicing  Interest to be serviced monthly, as per the
monthly instalment.
8 Processing Fee,  Processing Fee: Nil
Documentation Charges:  Documentation Charges: Nil
However stamp duty as applicable will be required.

9 Sourcing of Applications  Under Tie-up arrangement with NABARD
approved NGOs (JLGPIs). The NGOs will act as
supporting agency under the scheme.
 List of such NGOs has been circulated
separately.
 Tie-up arrangement already entered by
erstwhile Madhya Bihar Gramin Bank and
erstwhile Bihar Gramin Bank remains valid till
any further instructions from designated
authority.
10 Social Security Scheme,  Possibilities of cross selling of banks products
Optional viz Atal Pension Yojana, Pradhan Mantri
Suraksha Bima Yojana (PMSBY) and Pradhan
Mantri Jeevan Jyoti Bima Yojana (PMJJBY) etc.
for eligible primary borrowers or their family
members to fulfill the social security aspect of
borrower is explored by the branch.
 Premium amount for the above schemes is
ensured through borrowers saving accounts at
Dakshin Bihar Gramin Bank.
 NGOs-JLPGIs ensures the deposit of such
premium amount in the saving account well in
time.
11 Processing  KYC Check
 Credit Information check (from
CIBIL/Highmark/Equifax), necessary due
diligence and processing is done by the Branch
official of the concerned branch.
 No adverse remarks should be found/Traced in
the CIBIL report for any JLG members.
 Turnaround Time to be maintained at
maximum 6 working days.
 The loan applications of JLG, in batches of say
8-10 groups to be submitted in respective ROs
by the NGOs-JLGPIs COMPULSORLY under a
covering letter signed by secretary/authorized
36 | P a g e
signatory of concerned NGOs and same day it

should be dispatched to branches on the same
day.
 Names of all individual JLG members’ vis-à-vis
specific activity and loan amount/Son
of/Village with serial No for each JLG under
submission.
 RO/BO to also MAINTAIN appropriate data
base in excel & register to check multiplicity of
one person in different JLGs and antecedents/
credentials of individual borrowers/persons
for current & future uses.
 Sanction will be valid for the period up to 30
days from the date of approval/sanction.
 Branch should satisfy themselves about end-
use of the fund.
 KYC to be checked and cross verified from
original by Branch Manager (BM).
 Proper Documentation and Disbursement will
be done at concerned Branch. Sanction
authorities/BM will verify the passbook of the
SF A/C of the JLG members opened before
sanction/disbursement of the JLG loan.
 No members of the group should be defaulter
of any Bank/FI.
 Necessary proof/documents to be obtained
from the target clientele by NGOs-JLGPI to
ensure their identity as economically poor,
small and marginal farmers, artisans, landless
labourers, testing overall eligibility of JLG as
envisaged in the scheme.
 Maximum exposure in Microfinance including
proposed exposure should not exceed
maximum ceiling of Rs.1.00 Lakh. However, it
should be ensured that all existing account of
the borrower is in irregular status.
 No Stamp duty is admissible if the proposed
activity is under Farm sector, however, in case
of Non- Farm Sector requisite stamp
admissible as per the Stamp Duty circular to be
obtained.
12 Role and Responsibilities  Sourcing of Application as per product norm.
of NGOs-JLPIs under Tie  Recommendation will be done by sourcing
up arrangement/MOU NGOs in the application form.
 NGOs-JLGPIs will be responsible for the Pre-
Sanction verification, post sanctioning follow
37 | P a g e
up and timely recovery of loan as well as

monitoring of the loan/assets created during
the entire tenure of loan.
 A Memorandum of understanding (MoU)
between Bank and NGOs-JLGPIs to be entered
for the purpose. (HO level)
 BMs/Branch official’s responsibility will not be
diluted in the plea that such applications/JLGs
are being sourced/sponsored/vetted by NGOs.
NABARD provides financial incentive to Bank for passing on to NGOs, for formation, nurturing
and financing of 1000 JLGs at rate of ₹1,600 per JLG. The incentive is linked with the first
financing of JLGs by the bank.
The incentive amount is released in three instalment as indicated below.
i. First instalment of Rs.800/- would be released after disbursement of loan by the bank.
ii. Second instalment of Rs.400/- would be released after one year from the date of loan
disbursement subject to the certification by the financing bank that the loan repayment
is regular/without default by all the individual members of the JLG.
iii. Third instalment of Rs.400/- would be released on closure of the loan account by all
members of JLG or after the end of second year from the date of loan disbursement
subject to similar certification from financing bank, whichever is early.
38 | P a g e
Chapter-5
5.1) DATA REPRESENTATION
5.1.1) ARA
NO. OF A/C
No. of Accounts
2500
2000
1500
1000
500
0
May June
DISBURSMENT
63343551.5
Total Disbursment
53079786.5
MAY JUNE
Total No. of Accounts opened During May is 2093 and total amount disbursed is
₹53079787.
Total No. of Accounts opened During June is 1492 and total amount disbursed is
₹63343551.5.
39 | P a g e
5.1.2) AURANGABAD
NO. OF A/C
No. of Accounts
2800
2780
2760
2740
2720
2700
2680
2660
May June
DISBURSMENT 104799640
Total Disbursment
84778172
MAY JUNE
₹84778172.
₹10479960.
40 | P a g e
5.1.3) BEGUSARAI
No. of A/c
3500
3000
2500
2000
1500
1000
500
0
May June
No. of Accounts
DISBURSMENT
Total Disbursment
111203325
62323754
May June
₹62323754.
₹111203325.
41 | P a g e
5.1.4) BHABHUA
No. of A/c
No. of Accounts
3100
3050
3000
2950
2900
2850
2800
2750
2700
2650
2600
2550
May June
DISBURSMENT
160000000
138053132
140000000
120000000 113369766
100000000
80000000
60000000
40000000
20000000
0
May June
Total Disbursment
₹113369766.
₹138053132.
42 | P a g e
5.1.5) BHAGALPUR
No. of A/c
1560
600
MAY JUNE
No. of Accounts
Disbursment
60000000
54131060.6
50000000
40000000
30000000
19402378
20000000
10000000
0
May June
Total Disbursment
₹19402378.
₹54131060.6.
43 | P a g e
5.1.6) BIHARSHARIF
No. of A/c
2559
1681
MAY JUNE
No. of Accounts
Disbursment
100000000 93995942.4
90000000
80000000
70000000 65428754.5
60000000
50000000
40000000
30000000
20000000
10000000
0
May June
Total Disbursment
₹65428754.5.
₹93995942.4.
44 | P a g e
5.1.7) GAYA
No. of A/c
1766
1201
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
266786130
51671327.4
May June
₹266786130.
₹51671327.4.
45 | P a g e
5.1.8) JAMUI
No. of A/c
1418
684
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
52011590.1
21583905
May June
₹21583905.
₹52011590.1.
5.1.9) NAWADA
46 | P a g e
No. of A/c
1578
1000
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
89421033.7
41663981
May June
₹41663981.
₹89421033.7.
5.1.10) PATNA
47 | P a g e
No. of A/c
2290
2194
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
105809797
90332902.4
May June
₹90332902.4.
₹105809797.
48 | P a g e
5.1.11) SAMASTIPUR
No. of A/c
2290
1582
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
101244823
49798260
May June
₹4979860.
₹101244823.
49 | P a g e
5.1.12) SASARAM
No. of A/c
2740
1986
MAY JUNE
No. of Accounts
Disbursment
Total Disbursment
143873561
79791267.4
May June
₹79791267.4.
₹143873561.
50 | P a g e
5.1.13) NRLM Disbursment

May 2019
ARA AURANGABAD BEGUSARAI
BHABHUA BHAGALPUR BIHARSHARIF
GAYA JAMUI NAWADA
PATNA SAMASTIPUR SASARAM
SCHEME Region No. of A/Cs Disbursed Amount

CCSHG ARA 2093 53079787
CCSHG AURANGABAD 2793 84778172
CCSHG BEGUSARAI 1619 62323754
CCSHG BHABHUA 2721 113369766
CCSHG BHAGALPUR 600 19402378
CCSHG BIHARSHARIF 1681 65428755
CCSHG GAYA 1766 266786130
CCSHG JAMUI 684 21583905
CCSHG NAWADA 1000 41663981
CCSHG PATNA 2194 90332902
CCSHG SAMASTIPUR 1582 49798260
CCSHG SASARAM 1986 79791267
51 | P a g e
5.1.14) NRLM Disbursment

June 2019
ARA AURANGABAD BEGUSARAI

BHABHUA BHAGALPUR BIHARSHARIF
GAYA JAMUI NAWADA
PATNA SAMASTIPUR SASARAM
SCHEME Region No. of A/Cs Disbursed Amount

CCSHG ARA 1492 63343551.5
CCSHG AURANGABAD 2712 104799640
CCSHG BEGUSARAI 2890 111203325
CCSHG BHABHUA 3030 138053132
CCSHG BHAGALPUR 1560 54131060.6
CCSHG BIHARSHARIF 2559 93995942.4
CCSHG GAYA 1201 51671327.4
CCSHG JAMUI 1418 52011590.1
CCSHG NAWADA 1578 89421033.7
CCSHG PATNA 2290 105809797
CCSHG SAMASTIPUR 2614 101244823
CCSHG SASARAM 2740 143873561
52 | P a g e
CONCLUSION
Microcredit and microfinance have received extensive recognition as a strategy for poverty
reduction and for economic empowerment. Microfinance is a way for fighting poverty,
particularly in rural areas, where most of the world's poorest people live. Accessing small
amounts of credit at reasonable interest rates give poor people an opportunity to set up their
own small business. Many studies show that poor people are trustable, with higher
repayment rates than conventional borrowers.
When poor people have access to financial services, they can earn more, build their assets,
and cushion themselves against external shocks. Poor households use microfinance to move
from everyday survival to planning for the future: they invest in better nutrition, housing,
health, and education.
Most poor people cannot get good financial services that meet their needs because there are
not enough strong institutions that provide such services. Strong institutions need to charge
enough to cover their costs. Cost recovery is not an end in itself. Rather, it is the only way to
reach scale and impact beyond the limited levels that donors can fund. A financially
sustainable institution can continue and expand its services over the long term. Achieving
sustainability means lowering transaction costs, offering services that are more useful to the
clients, and finding new ways to provide banking services to the poor. At the end it should be
mentioned that Poor people with no income or means of repayment need other kinds of
support before they can make good use of loans. In many cases, other tools will alleviate
poverty better—for instance, small grants, employment and training programs, or
infrastructure improvements. Where possible, such services should be coupled with building
savings.
53 | P a g e
FINDINGS
1) Dakshin Bihar Gramin Bank is not directly involved with the customers or the service
receivers of Micro - Financial services which leads to communication gap.
2) Dakshin Bihar Gramin Bank post sanctionment follow up is not satisfactory which can
lead to greater no. of defaults or diversion of Funds.
3) Dakshin Bihar Gramin Bank exposure of microfinance programs to outlying villages is

very low and the awareness for the same is missing.
4) After the amalgamation the disbursement in microfinance sectors minimal and

revenue generation is next to minimum.
5) Research of new innovative avenues were not seen and analysis of local economic
conditions, migration patterns, obstructions to economic growth was missing.
54 | P a g e
SUGGESTION
 Dakshin Bihar Gramin Bank should help in formation as well as maintenance of SHGs
that offer financial guidance and credit, promote savings, free members from unfair
debt burdens, and create collective action opportunities that minimize exploitation of
women and other marginalized groups.
 Offer skills training and capacity-building workshops to increase economic

independence, empowerment, and local employability of women and other
underserved groups.
 Develop small businesses that produce saleable goods, such as traditional handicrafts.
 Consult start-up microfinance programs that struggle with operational, financial, or

institutional sustainability.
 Provide entrepreneurial skills training to conduct feasibility studies, perform

cost/benefit analyses, write business plans, acquire financing, and initiate start-ups.
 Research and analyse numerous topics that include local economic conditions,
migration patterns, obstructions to economic growth, and efficacy of microfinance
programs.
 Dakshin Bihar Gramin Bank should expand and increase exposure of microfinance
programs to outlying villages.
 Dakshin Bihar Gramin Bank should also help in marketing, distribution, pricing, and
management training to local microenterprises.
55 | P a g e
LEARNING EXPERIENCE
 The project provided introduction to one of the emerging issue-Microfinance. The

study gives details about the active participation of different microfinance institutions,
NABARD facilitation, NGO’s, different banks-private, government, nationalized,
commercial etc. with a focus on Dakshin Bihar Gramin Bank achievements.
 The purpose of the study is to gain in depth knowledge about Microfinance- a tool for
poverty eradication.
 The study gives details about the demand and supply of microfinance services.
 It provided insight about various schemes and initiatives adopted by the RBI, NABARD,
SIDBI etc. .
 It helped me to understand in detail all the schemes of Dakshin Bihar Gramin Bank for
Financial inclusion.
 The study provided exposure to the benefits and impact of Microfinance and financial
inclusion.
 The study gave details about the RBI guidelines and targets.
 The study shows the quantitative impact of each scheme and tool.
 The study also provides information about the extent of financial inclusion
56 | P a g e
BIBLIOGRAPHY
Books
1) Debadutta Kumar Panda, Understanding Microfinance
2) Microfinance perspectives and operation by Macmillan publication for Indian
institute of banking and finance
Circular
1) Loan & advances/ circular no. 24/2019
Reports
1) Director’s Report of Madhya Bihar Gramin Bank 2017-18
2) Director’s Report of Dakshin Bihar Gramin Bank 2018-19
3) A report on Dhaka Starting Microfinance in India – Vijay Mahajan, Bharti Gupta
Ramola and Mathew Titus, Basix.
4) Research paper by Prabhu Ghate Research paper by Vishal Sehgal Presentation by N.
Srinivasan.
Websites
1) Wikipedia.org/wiki/Regional_Rural_Bank
2) Wikipedia.org/wiki/Microfinance
3) Wikipedia.org/wiki/Microcredit
4) https://dbgb.in/
5) https://dbgb.in/welcome/loan/5
6) https://www.rbi.org.in/
7) https://www.nabard.org/

Microfinance in Bihar: An Overview of Dakshin Bihar Gramin Bank

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1.1 A BRIEF INTRODUCTION

Microfinance is a general term to describe financial services to low-Income individuals or to

According to Marguerite S. Robinson “Microfinance refers to small scale financial services

1.2 OBJECTIVE OF THIS STUDY REPORT

 The objective of this study is to get an overview of Microfinance Industry in Bihar.

 To understand the process of Microfinancing.

 To identify the factors responsible for loan defaults by clients of DBGB.

 To study the effect of Microfinancing schemes on the Financial Performance of Dakshin

1.3 SCOPE OF THE STUDY

2.1 About ‘DAKSHIN BIHAR GRAMIN BANK’

2.2 Major Achievement of DBGB performance during 2018-19

31-12-2018 DBGB 31-03-2019

2.3 BOARD OF DIRECTORS

Board of directors for MBGB AS ON 31.12.2018:

I. Sri Pranaya Kumar Mohanty ------ Chairman

Board of directors for BGB AS ON 31.12.2018:

I. Sri Perm Shankar Jha ---------------- Chairman

I. Dr. Arif Javed -------------------------- Chairman

Board of Directors for DBGB as on 31st July 2019

2.4) MISSION & VISION

2.5) SHARE CAPITAL

Total Amount received from share holders

Govt. Of India Govt. Of Bihar Punjab National Bank

2.6) KEY PERFORMANCE INDICATOR AS ON 31.03.2019:

PARTICULARS MARCH 31, 2019 JANUARY 01, 2019

2.7) Balance Sheet as on 30-06-2019

DAKSHIN BIHAR GRAMIN BANK

Balance Sheet as on 30-06-2019/ तुलन-पत्र यथा दिनाांक 30.06.2019

2.8) Organisational structure of DBGB (HO)

2.8.1) Board of Directors

SPONSOR State Govt. Central Govt.

2.8.2) Organisational Hierarchy of DBGB (HO)

General General General

Department Department Department

Officers Officers Officers

Office Office Office

A large variety of actors provide MF in India, using a range of MF delivery methods.

3.1.1) MICROFINANCE DEFINITIONS

According to Robinson, Marguerite.

According to International Labour Organization (ILO),

“Microfinance is an economic development approach that involves providing financial

3.1.2) HISTORY/ORIGIN OF MICROFINANCE

3.1.3) GROWTH OF MICROFINACE

3.1.4) Development process through Microfinance

3.2) MAJOR PLAYERS

RASHTRIYA MAHILA KOSH

4.1) Micro Loan to JLG Members under Tie-up arrangement with

4.1.2) Features of the Scheme:

S. No. Features Details

 Loan for all monthly/regular income generating

2nd cycle or similarly onwards for the 3rd cycle,

1st Cycle – Max ₹ 20000/- per member of JLG

Repayment: 18 Months 24 Months 30 Months

8 Interest Servicing Interest to be serviced monthly, as per the

i) First instalment of Rs.1,000/- would be released

4. The payment shall be made by the Head Office

5. CDOT will also maintain their own data base to

person in different group and for further reference

4.1.3) Sanction & Disbursement:

4.2) Deendayal Antyodaya Yojana-National Rural Livelihoods

take up jobs in organized sector, enabling these institutions to access their