Credit Financing in The Sanitation and Water Sector

Credit Financing in the Sanitation and Water Sector i
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The information contained herein is subject to change and does not commit MDWS for any factual error.
ii Credit Financing in the Sanitation and Water Sector
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The information contained herein is subject to change and does not commit MDWS for
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Theinformation contained
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MDWS for any factual error.
Credit Financing in the Sanitation and Water Sector iii
Preface
Swachh Bharat Mission has been able to achieve significant strides over the last 4 years
by providing underserved areas access to toilets and encouraging their sustainable use.
More than 300 plus districts in India are now ODF with a toilet coverage of nearly 79% in
rural India. As we chart the course ahead for SBM and increasing ODF coverage in India,
it is an opportune moment to develop a comprehensive framework for ODF sustainability
and ODF plus activities, namely Solid and Liquid Resource Management in rural areas.
In order to meet the target of 100% coverage and to ensure sustainability of ODF,
there is significant need for credit at the household and enterprise level. This need
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for credit arises on account of several reasons, including: households left out of the
baseline survey, households with dysfunctional toilets; households with toilets that need
upgradation; households that need bridge funding for constructing toilets before they
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are eligible to receive the SBM incentives; and enterprises that work in the sanitation
supply chain or solid and liquid waste management. Through this document MDWS
aims to create a repository for Credit Financing that includes existing policy framework,
description of existing credit models, and recommendations for the way forward to
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enable credit financing to be used as an alternative or a compliment solution to
traditional funding mechanisms for the achievement of ODF and ODF-S.
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iv Credit Financing in the Sanitation and Water Sector
Acknowledgments
Ministry of Drinking Water and Sanitation would like to acknowledge the following
organizations for the contribution in compiling Credit Financing in the Sanitation and
Water Sector.
Adhikar- Bhubaneshwar, Odisha
Cashpor- Micro Credit, Varanasi, UP
CEO, Zilla Panchayath, Dharwad, Karnataka
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Dhan Foundation- Madurai, Tamil Nadu
GAP Foundation- New Delhi, Delhi
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IDFC Bank- Mumbai, Maharashtra
IDFC Bharat- Trichy, Tamil Nadu
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Society for Integrated Development in Urban and Rural Areas (SIDUR)- Hyderabad,
Telangana
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Svadha WASH Pvt. Ltd- Bhubaneshwar, Odisha
MythriSarvaSevaSamithi- Bangalore, Karnataka
UNICEF- New Delhi, Delhi and Mumbai, Maharashtra
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USAID- New Delhi, Delhi
Water.org- Chennai, Tamil Nadu
Credit Financing in the Sanitation and Water Sector v
Content
Abbreviations vii
Index 1
1. Executive Summary 1
2. Need for Credit 2
3. Regulatory Framework 3
4. Current Status 3
4.1. Household Lending 3
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4.2. Benefits of Credit 4
4.3. Current Models 4
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4.4. Proposed Models 4
5. Enterprise Lending 4
6. Next Steps 5
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Case Studies and Videos 7
7. SHG Model: Case Study + Video (DHAN Foundation, Tamil Nadu) 7
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8. MFI Model: Case Study + Video (CASHPOR Micro Credit, Uttar Pradesh) 12
9. Bank-BC Model: Case Study + Video (IDFC Bharat, Tamil Nadu) 16
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10. Building ODF-S through Supply Chain: MSME
Case Study (Svadha, Odisha) 20
11. Building an Integrated District Level WSS Ecosystem:
Case Study (Maharashtra) 25
12. Integrating credit financing with the SBM incentive:

Case Study+ Video (Dharwad, Karnataka) 29
13. Established MOU and targets with Financial Institutions:

Case Study (Madurai, Tamil Nadu) 33
14. Voice of Customer: Reflections of various credit customers:

Video (Pan-India) 37
One-page Guidance Notes 38
15. One-page Guidance Note for SBM Mission Directors 38
16. One-page Guidance Note for District Collectors 40
17. One-page Guidance Note for Front-line Workers 42
Annexures 44
vi Credit Financing in the Sanitation and Water Sector
A. RBI 2015 guideline approving water and sanitation as part

of Priority Sector Lending 44
B. RBI 2017 guideline including toilet as an eligible category

for loans made through State Rural Livelihood Mission SHGs 60
C. Master list of currently available sanitation loan products 79
D. Template for capturing credit requirements at village level 81
E. Copy of MOU between District of Madurai DRDA and

DHAN Foundation 85
F. Frequently Asked Questions 88
G. Presentation on Credit Financing for WASH
H. Presentation by DHAN Foundation
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I. Presentation by IDFC
J. Presentation by Svadha
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Credit Financing in the Sanitation and Water Sector vii
Abbreviations
BC Business Correspondent
BF Business Facilitator
BPL Below Poverty Line
CHF Community Health Facilitator
CoM Community Mobilizer
DDC District Development Committee
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DFS Department of Financial Services
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DLCC District Level Consultative Committee
DLRC District Level Review Committee
DPRO District Panchayat Raj Officer
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GP Gram Panchayat
IHHL Individual Household Latrines
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IPPB India Post Payments Bank
JLG Joint Liability Group
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MFI Micro Finance Institution
MUDRA Micro Units Development and Refinance Agency
MSME Micro, Small and Medium Enterprise
MDWS Ministry of Drinking Water and Sanitation
MoF Ministry of Finance
MOU Memorandum of Understanding
NRLM National Rural Livelihoods Mission
ODF Open Defecation Free
PDO Panchayat Development Officer
PRI Panchayati Raj Institution
PRS Panchayati Raj System
PSB Public Sector Banks
viii Credit Financing in the Sanitation and Water Sector
RBI Reserve Bank of India
RRB Regional Rural Bank
SB Saving Bank
SBCC Sanitation Behavior Change Communication
SBM Swachh Bharat Mission
SFB Small Finance Bank
SHG Self-Help Group
SHGPI Self-Help Group Promoting Institution
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SLBC State Level Bankers’ Committee
SRLM State Rural Livelihoods Mission
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WSS Water Supply and Sanitation
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Credit Financing in the Sanitation and Water Sector 1
Index
1. Executive Summary that need bridge funding for constructing
toilets before they are eligible to receive
Significant progress has been made under
the SBM incentives; and enterprises that
the SBM, and the coverage of individual
work in the sanitation supply chain or solid
households with toilets in rural India has
and liquid waste management.
risen to 78.98% from 38.4% at the start of
the mission. To achieve “Swachh Bharat” by The RBI has made two landmark regulatory
2019, the coverage of individual households changes in order to facilitate lending in
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needs to reach 100% and the ODF-declared the sanitation and water sector. There
villages and districts need to maintain are several existing models of lending
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their ODF status over time. that are being used across the country
that can be replicated and scaled. It is
In order to meet the target of 100% imperative that the district administration
coverage and to ensure sustainability of be able to assess and capture the credit
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ODF, there is significant need for credit requirements at both the household and
at the household and enterprise level. the enterprise level; get familiar with the
This need for credit arises on account of existing credit models; select the models
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several reasons, including: households that are most appropriate to their region
with dysfunctional toilets; households with and leverage the DLCC and SLBC to
toilets that need upgradation; households enable credit flow to those in need.
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Figure 1: Loan disbursement.
© Water.org
2 Credit Financing in the Sanitation and Water Sector
2. Need for credit financing in should direct their credit. Refer to RBI
circular FIDD.CO.Plan.BC.4/04.09.01/2015-
the sanitation and water 16 dated July 1,2015. (refer Annexure A)
sector
2. Inclusion of toilet construction as a
There is significant need for credit in the category for which Self Help Groups
sanitation and water sector, both at the (SHGs) linked to the National Rural
household level and at the MSME level. The Livelihoods Mission (NRLM)/State Rural
need for credit is outlined in Table 1 below: Livelihood Missions (SRLMs) can avail
Table 1: Close look at need for credit in water and sanitation sector
Category of Why the need for credit exists

households in need
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Households in With dysfunctional toilets
districts that are not
yet ODF With toilets that need upgradation
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Not eligible for incentives
New households since base line survey
Require up-front/bridge funding before they can avail of the
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incentive
Water connections/ filters/ rainwater harvesting structures
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Households in ODF Retro-fitting/ upgradation of toilets
districts
Addition of bathing facilities
Water connections/ filters/ rainwater harvesting structures
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Micro, small and Sanitation supply chain enterprises/ Sanitation marts
medium enterprises
Solid waste management enterprises
Fecal sludge management enterprises
Community water purification enterprises
3. Regulatory framework for loans. Refer to RBI FIDD.GSSD.CO.BC.

No.04/09.01.01/2017-18 dated July 1, 2017.
credit financing
(refer Annexure B)
In order to facilitate consistent lending
in this sector, two landmark regulatory According to the RBI data, directing 1% of
the priority sector limits of commercial
changes were made by the RBI, with the
banks towards sanitation and water
support of the MoF and the MDWS.
sector can release approximately ` 28,000
1. Designation of drinking water and crores of credit annually. (Refer RBI data
sanitation – including at the household on operations and performance of
level – as a new priority sector towards commercial banks for 2016-17).
which banks and regional rural banks
4. Current status of credit mile partners, including micro finance

institutions (MFIs) and credit-linked SHGs.
financing
Suitable loan products can and have
4.1 Household lending been developed for household lending for
Household lending for sanitation and sanitation and water. A list of sanitation
water has been happening in India for the loan products with indicative terms is
past several years. Close to 13 lakh loans, provided in Annexure E. Some key products
aggregating over ₹1,865 crores, have been and terms are mentioned in Table 4 below:
made in 17 states, reaching approximately
60 lakh people. 60% of the loans have been The amount of the loan product varies
made for building/ upgrading household across regions and across financial
toilets while roughly 40% of loans have institutions, based on the appropriate
been made for connecting to piped water product for the region, the client profile of
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systems. These loans have been made the financial institution, and affordability.
directly by banks or with the help of last-
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Table 2: Data on sanitation and water microlending to date
Calendar # of toilet ` crores # of water ` crores Total `
year loans loans crores
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Upto 2012 51,523 62 39,412 28 90
2013 79,550 122 68,113 53 175
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2014 1,28,517 145 1,17,788 72 217
2015 1,02,946 166 76,519 51 217
2016 1,83,291 464 88,085 65 529
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2017 2,39,391 471 1,12,647 166 637
Total 7,85,218 1,430 5,02,564 435 1,865
Source: Water.org. Water.org. The above data is for Water.org’s partner financial institutions in India through December 30, 2017.
Water.org has been working in this sector in India since 2004.
Table 3: - Cursory overview of sanitation and water loan products

Purpose Amount ` Security Repayment period
New toilet 10-25,000 Unsecured 12-24 months
Upgradation of existing toilet 10-25,000 Unsecured 12-24 months
Piped water connection 5-10,000 Unsecured 12-24 months
Water filter 2,500-15,000 Unsecured 12-24 months
Rainwater harvesting tank 10,000 Unsecured 12-24 months

Source: Water.org
4.2 Benefits of credit that are being developed for household

sanitation lending. These include:
The loans for sanitation and water are
income-enabling and life-enhancing - IPPB acting as business facilitator for
for the borrowers: they have led to Punjab National Bank to reach the last
convenience, time savings, increased mile consumer. The postmen will help
privacy, heightened safety, reduced generate demand and will assist in loan
expenditure on healthcare and an disbursement and repayment.
improvement in overall quality of life. It
- Small finance banks using their
has also been observed that the usage of extensive branch network to reach last-
toilets is higher when the user has been mile consumers.
involved in the design and construction
- Public and private sector banks
of the toilet. Being involved in the design,
providing ‘sanitation and water’ loans
and borrowing for construction of the
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to the credit-linked SHGs of SRLMs.
toilet, results in sustainable usage when
compared to usage patterns of consumers - Public and private sector banks
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that have received free toilets constructed providing ‘sanitation and water’ bulk
by a third party. loans to BCs
4.3 Current credit models . 5. Enterprise lending
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Banks have been currently lending for As the models for solid and liquid
sanitation and water in one or more of waste management and faecal sludge
the following ways outlined below in Table management enterprises develop, the
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5. Case studies on each of these models credit financing for these enterprises
will also develop. The likely lenders for
(written and video) are provided in
the enterprises will be banks, including
Sections 7-14.
RRBs and SFBs, as well as MFIs. Given that
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these are evolving models where revenue
4.4 Proposed credit models assurance is still to be tested at scale, it is
With the encouragement of the MoF and quite possible that lenders to the MSMEs
the MDWS, banks continue to innovate and will need credit enhancement/ refinancing
scale. There are several exciting models under the MUDRA scheme.
Table 4: Current water and sanitation credit models

Method Examples of banks using method
Credit linkage to SHGs
- Government SHGs/ SRLMs (e.g. MAVIM, ICICI Bank

Stree Nidhi)
- Non-Government SHGs (e.g. DHAN) Bank of India, Indian Bank, Canara Bank
Direct lending to SHGs/JLGs Bandhan Bank, IDFC Bank
Individual lending IDFC Bank
Bulk lending to Business Correspondents State Bank of India, HDFC Bank, Yes Bank
Source: Water.org
6. Next steps c. Inform stakeholders that credit

financing for sanitation and water is
Credit for sanitation, both at household approved under RBI guidelines and
and at enterprise level, is an important tool can be used independently or as a
for district collectors to achieve ODF and complement to the SBM incentive.
to ensure long-term ODF-S. The important
next steps are: d. Encourage all financial players in the
state (PSBs/RRBs/Private Banks/SFBs/
For SBM Mission Directors: MFIs/ BCs) to support credit financing
as a product for both IHHLs and
a. Inform stakeholders that credit MSMEs.
approved under RBI guidelines and e. Advise SLBC to increase credit linkage/
can be used independently or as a bulk lending through SRLM/ SHGs/
JLGs/ MSMEs for toilets. Set sanitation
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complement to the SBM incentive.
and water lending targets and monitor
b. Encourage all financial players in the progress through the DLCC.
state (PSBs/RRBs/Private Banks/SFBs/
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MFIs/ BCs) to support credit financing f. Establish goals, action plans, and MOU
as a product for both IHHLs and with SHGs/financial institutions (refer to
MSMEs. case study 13: Madurai, Tamil Nadu)
g. Support District CEOs/DDC/DPRO and
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c. Advise the SLBC to increase credit
linkage/bulk lending through SRLM/ banks to integrate incentive (refer to
SHGs/ JLGs/ MSMEs for toilets. case study 12: Dharwad, Karnataka).
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d. Establish State goals and action plans; For front-line workers:
initiate MOUs with SHGs/financial a. Inform local stakeholders (GP/PRI/
institutions (refer to case study 13: PRS/ANM/CoM/Asha etc.) that credit
Madurai, Tamil Nadu).
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e. Support District CEOs/DDC/DPRO and approved under RBI guidelines and
banks to integrate incentives (refer to can be used independently or as a
case study 12: Dharwad, Karnataka). complement to SBM incentive (as
applicable).
For District Collectors: b. Encourage all financial players at
a. District Collectors are urged to assess district/block (PSBs/RRBs/Private Banks/
and record the criteria for credit at SFBs/MFIs/ BCs) to support credit
household and enterprise levels in their financing as a product for both IHHLs
villages and districts (refer to Annexure and MSMEs.
D: Template for capturing credit
requirement at village level). c. Create and maintain an active list
of financial institutions that offer
b. District Collectors should familiarize sanitation and water loans with contact
themselves with the existing models details. Provide information to people
for credit delivery and correspondingly with funding needs.
train community cadres at the district,
block and panchayat levels (refer to the d. Conduct village-level credit needs
written case studies and videos: 7-9, 11, assessment (refer to Annexure D:
14). Template).
Figure 2: From loan to toilet.
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© Water.org
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Case Studies and Videos
CASE STUDY #7:
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SHG Model DHAN
Foundation, Tamil Nadu
Introduction
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The value of credit financing for
sanitatation
To meet the Swachh Bharat Abhiyan
(SBM) target of 100% sanitation coverage
and ensure ODF sustainability, there is
significant need for credit at the household
and enterprise level. This case study is
designed to help interested parties learn
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partly because these structures already
have built-in monitoring systems.In
addition, health and hygiene knowledge
dissemination should happen at all levels
of interaction, from internal staff out to the
borrower, to have maximum impact.
DHAN Foundation - An
more about how DHAN Foundation has
Overview
successfully integrated sanitation lending Development of Humane Action (DHAN)
into their normal portfolio of work and Foundation is a professional Self Help
their keys to success. Promoting Institution (SHPI) that has been
working in community-based development
since 1997. With the mission of “Building
Key takeaways people and institutions for development
Harnessing the deep network provided innovations and scaling up to enable the
by large federated collections of Self- poor communities for poverty reduction
Help Groups (SHGs) is a strategic action and self-reliance”, over the years DHAN has
extended its activities to 78 districts across bank linkage and internal SHG funds.
14 States. This experience provided the DHAN team
internal expertise on lending for sanitation
DHAN’s microfinance program is known and water as well as a sense of the
as the Kalanjiam Community Banking demand for sanitation and water financing
Program (KCBP), in which Self-Help Groups which they had not previously understood.
(SHGs) are promoted, federated and Based on this, DHAN developed a plan to
formally registered as independent, self- bring their sanitation and water financing
reliant entities. KCBP mainly focuses on program to scale.
bringing SHG members into the formal
banking sector through SHG-Bank linkage Started in April 2016, the SCALE UP
programs in which DHAN facilitates special program aims to reach a minimum 250,000
relationships between banks and SHGs. households with access to improved
sanitation and safe drinking water by
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March 2019. As of December 2017, 147 DHAN
Sanitation and water financing federations from 48 districts across 11
through SHG-bank linkage states have dispersed 1,54,623 sanitation
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DHAN’s sanitation and water financing and water loans through the Kalanjiam
options for its SHG members formally network, with a vast majority of these loans
started in April 2013. The first program was being used for toilet construction. This
implemented in 31 DHAN federations. Over means that since the Kalanjiam program
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three years, 17,755 families took loans to began promoting sanitation and water
realize on-site access to sanitation and/ loans in 2013, DHAN SHG members have
or safe water, benefitting 82,198 people. taken over 154,000 loans through the end
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A total amount of ₹24.39 Crores was of 2017. SHG repayment rates hover near 100
mobilized through a combination of SHG- percent.
Loan details by product
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(April 2013-December 2017)
To assess the appetite for these loans,
DHAN Foundation conducted an Internal
Potential Survey (also known as a Market
Assessment) among its 350 Federations.
This survey helped to DHAN to prioritise
and focus upon Federations and/or
geographies with high sanitation and
water needs as well as to develop loan
products that would be desirable to
its SHG members. SHGs have ultimate
authority to determine loan sizes on a
borrower-by-borrower basis, allowing for
contextualization based upon the needs
of the borrower, local costs for labour and
supplies, etc.
Loan details by product (April 2013-December 2017)
Loan product Number loans Number beneficiaries Loan Amount (₹ Crores)
Toilet 1,22,580 5,86,452 368
Water Connection 30,047 1,43,124 33
Water Filter 1,996 9,589 2
Total 1,54,623 7,39,164 403
Supply and demand: ensuring then disburses individual loans at SHG

meetings to its members, following the loan
available skilled labour details supplied as an Annexure in the loan
While many masons are available in rural application to the bank.
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areas, few of them are trained to construct
toilets that align with Government and Borrowers are eligible for sanitation and
DHAN standards. Therefore, DHAN water loans once they have repaid at least
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developed a mason training program in one loan. At any given time, a borrower
which they identify 2-3 Master Masons can have two active loans if one is for
in an area who each identify 5-6 more sanitation or water.
participants. Masons who complete the
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program are promised a minimum of 75-100
Demand creation for sanitation
toilet construction jobs from DHAN SHGs as
well as opportunities for house construction credit financing
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in the associated housing program. Demand generation is the key to DHAN
Foundation’s sanitation and water
financing. The importance of and
Loan process and distribution benefits from improved sanitation and
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Every SHG meets once a month, during safe drinking water are disseminated
which time they pass and sign a resolution at three levels: the community level, the
detailing the total number of members SHG member level, and the DHAN staff
interested in availing of sanitation and level. Health Committees, comprising of
water loans in the current cycle. Loans SHG representatives, are responsible for
for less than ₹10,000 are approved at the ensuring that all members in their group
SHG level, loans between ₹10,000 - 20,000 who do not have a toilet at home and
are approved at the cluster level, and are eligible to avail a loan, take a loan,
loans above ₹20,000 are approved at construct and then use a toilet. In addition,
the Federation level. For a bank loan, federations require all homes constructed
the Federation submits a sponsorship via ‘new home’ loans to include a toilet.
letter to the bank for the total amount Federations monitor sanitation and water
requested by the SHG. An annexure loans at their monthly meetings. A total
provides individual loan details, including of 2,874 DHAN staff members are involved
the purpose for which the loan is being in its many activities, and of that number,
taken. The bank typically takes between 15- 2,126 of them are “People Functionaries”
30 days to approve a SHG loan. Approved employed (therefore paid) by the actual
loans are sanctioned to the SHG that made Federations, meaning that many of those
the application, and the SHG assumes staff are front-line workers, deeply engaged
responsibility in case of default. The SHG in demand generation.
DHAN’s three Layers of Demand Generation for WASH
At the SHG level, the cluster associate uses

Village level
one message card (DHAN has 32 such cards
campaigns, Mobile
with a picture on one side and a message
theatre [bus with AVs]
on the other) at each SHG meeting. At the
Gram Sabha Meeting/
cluster level, there are different committees
Community Level village leaders
for follow-up on construction, disbursal of
meetings, Posters,
WSS loans, ensuring use of funds etc. At
Banners, Student
SHG Level the federation meeting each month, it is
rallies, Cultural
mandatory to discuss WSS loans given in
events on WASH etc
their clusters
Demonstrations Units
At the community level, it is all about

Staff Level
education the village (not just the SHG
Message cards at members) about he importance of safe
SHG meetings water and sanitation. This happens through
demonstration units, participation in Gram
WASH an agenda Sabha meetings, poster/banners, vehicles
for monthly DHAN that have audio/visual messaging and in
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Federation meetings schools. The decision of deciding on target
villages is done at the federation level, after
rapid need assessment
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Staff training is key to enable them
Program Orientation prioritize and own the whole process of
training Exposure WASH financing. At the staff level, demand
visits to best generation and awareness is done through
performing models/ general training, exposure visits and training
institution. Training to of civil engineers. The Regional staff members
Civil Engineers Tots to after receiving ToTs, will impart training to
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Regional Staff frontline staff at their respective regions.
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Monitoring and construction incentives. Sometimes, that partnership
has become more formal. Madurai District
verification Administration, for example, signed a
In addition to the loan utilization checks MOU with DHAN Foundation to support
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by Microfinance Associates (the front-line their construction of 2,500 toilets for SBM-
staff charged with loan utilization), the eligible households over a three-month
Cluster lead for Health and Sanitation is period. After successful implementation
vested with the responsibility of ensuring of this requirement, neighboring Salem
asset creation and timely repayment of District Administration asked DHAN to
sanitation and water loans. Being from construct 6,777 toilets (see Case Study #13).
the local area, the Cluster lead visits the
construction sites frequently. SHG staff
visit the assets created on the meeting
What has been key to DHAN
days and report the asset construction Foundation's success in
status to the Cluster Office. In general,
offering sanitation loans?
toilets are completed within 30 to 60 days
from the receipt of a loan. The strong commitment of DHAN
Foundation leadership to the Swachh
Bharat Mission has transmitted to various
Coordination with national levels of staff members vertically and
schemes horizontally across its various institutions/
programs and serves as strong motivation
The SHGs frequently assist eligible
for sanitation and water lending. This
borrowers in submitting required
enthusiasm complements the government’s
documentation to access their SBM
drive to achieve SBM targets as well as
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the SHG demand for sanitation and water
loans that these loans have unlocked to
create the ideal environment for success in
sanitation and water lending.
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Foundation is its strong tie-ups with
government Departments and mainstream
banks. According to M.P., Vasimalai,
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Executive Director of DHAN Foundation,
lending for sanitation and water gives him
Thoughts from the leadership confidence that they will reach another
The flagship Kalanjiam program enables 500,000 families in the next three to four
SHG members to avail loans directly from years.
CASE STUDY #8:

MFI Model CASHPOR
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Micro Credit,
Uttar Pradesh
Introduction
sanitatation
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& Marketing, Repayment Collection,
Monitoring & Construction Verification,
and Coordination with National Schemes.
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To meet the Swachh Bharat Mission Key takeaway
Investment in local talent to market
sanitation loans and monitor the toilet
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construction is critical to long-term
and enterprise level. Credit is needed to
sustainability and success.
serve: households that were left out of
the SBM baseline survey, households with
dysfunctional toilets; households with CASHPOR Micro Credit - An
toilets in need of upgradation; households
that are not eligible to receive the SBM
Overview
incentive because of having received some CASHPOR Micro Credit (CASHPOR) is a
other government subsidy; and MSMEs not-for-profit company that provides
that support the sanitation supply chain microfinance services to Below Poverty
that is critical to toilets being constructed. Line (BPL) women in the states of Uttar
Pradesh, Bihar, Chhattisgarh, Jharkhand
This case study is designed to help and Madhya Pradesh. Aiming to assist
interested parties learn more about how those with inadequate or no access to
CASHPOR Micro Finance has successfully mainstream credit facilities, CASHPOR,
integrated sanitation lending into their one of the oldest microfinance companies,
normal portfolio of work and their keys started in Uttar Pradesh in 1997. A Section
to success. The study will chronicle 25 (now Section 8) company was formed
how the partner addresses the major to conduct concentrated microcredit
components of the lending cycle: Loan lending operations in 2002. CASHPOR
Product Development, Demand Generation offers multiple types of products that cater
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not only to income-generation but also to
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healthcare, women’s empowerment, energy, disbursed to 1,25,000 as of January 2018.
water, and sanitation needs. Under their
model, client poverty levels are assessed
Loan Product Development
through an internally-developed set of
Loan products are developed based
indicators, the Cashpor Housing Index
upon CASHPOR’s perception of consumer
(CHI), to determine how to enrol women in
demand. To determine those demands,
CASHPOR’s microcredit program.
the organization conducts a Credit Needs
Assessment every three years. Loan
CASHPOR started lending for sanitation
products that appeared most prominently
and water in 2011 in the Buxar district of
in the Needs Assessment are piloted
Bihar. Their lending in this category has
orscaled. Before any loan product is
scaled considerably over the past seven
developed, however, CASHPOR conducts a
years. Currently, CASHPOR sanitation
Demand Development Survey. This survey
and water loans are offered in 32 districts is typically administered with its JLG
of Uttar Pradesh, 16 districts of Bihar, 5 members to identify the various needs for
districts of Chhattisgarh, 4 districts of financial products like health, enterprise,
Jharkhand and 3 districts of Madhya housing, education, etc. Based on the
Pradesh. The annual number of sanitation survey outcomes, CASHPOR develops new
and water loans have grown from 5,000 financial products. CASHPOR currently
to 40,000, bringing their cumulative total offers loans for both sanitation and water.
Loan Product Loan Amount (₹) Interest Rate Maturity Repayment

Frequency
Sanitation 10,000 21.19% 12 months Weekly
Water 5,000 21.19% 12 months Weekly
After a successful pilot, CASHPOR cadre of Community Health Facilitators

generally offers a loan product across all (CHFs): promising individuals identified
branches. Given the intensive CHF program from among CASHPOR’s existing client
that CASHPOR has designed for these base who were then trained in sanitation,
sanitation and water loans, however (see water, health, hygiene and women’s-related
the next section), CASHPOR conducted a health matters to deliver the awareness
pilot from 2011-12 before scaling the loans messages in their respective communities.
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to selected geographies.
CHFs are trained via different health
modules to gain adequate knowledge in
Demand Generation, Marketing
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basic health and hygiene practices. The
and Borrower Education complete training program is 12 months:
the first six months are module trainings
CASHPOR strongly believes that better
that can fit alongside normal daily tasks,
health helps clients to contain 40% of
while the remaining six months consist of
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“leaks” in their income; andin so doing,
field-based, practical internships. After
contributes to poverty reduction.
completing the six-month internship, CHFs
Anticipation of challenges in promoting
are paid a one-time honorarium of ₹500.
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sanitation and water loans motivated
By the end of the full program, CHFs have
CASHPOR to begin efforts on raising
gained thorough knowledge on health,
awareness about sanitation and water and
nutrition, personal and environmental
encouraging behaviour change to ensure
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hygiene, vector borne diseases, sanitation
their lending program would be successful.
and other related topics.
Their solution was the development of a
As noted above, CHFs are selected from What has been key to
within the communities that CASHPOR
serves. Tapping local clients for this role
CASHPOR's success in offering
has helped the organization connect, sanitation and water loans?
communicate, and build trust among its CASHPOR’s success can be largely
borrowers. They are paid a small stipend attributed to the effectiveness of its
of ₹100 for each training module that they CHFs in creating awareness. The rigorous
provide to the community. Additionally, training programs that CASHPOR provides
because CHFs share the same socio- to the CHFs, combined with their local
economic conditions as the clients, they placement and specially-designed tools
can deeply relate to them, which has been and materials, are able to impart powerful
a critical factor in CHF behaviour and messages to those in the community who
attitude change success. lack toilets or piped water at their homes.
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Other factors of success include strong
Coordination with National leadership, high unmet needs, and
Schemes
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visible benefits to adolescent girls and
Because CASHPOR’s clients are BPL, the women. Finally, timely access to adequate
majority of them qualify for the Swachh financing remains instrumental: access
Bharat Mission (SBM) toilet incentive of to finance through the sanitation and
water program helps CASHPOR clients
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₹12,000. Like many eligible households
across the country, the adults work but to have sanitation and water facilities
lack adequate up-front funds to purchase without much time lag between CHF-led
awareness-building exercises and loan
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materials and pay labour costs that go
into constructing the toilet. In addition disbursements.
to offering the sanitation loan that can
enable its SBM-eligible clients to make Thoughts from the leadership
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necessary upfront investments, CASHPOR
Health shocks and health expenditures
also helps borrowerssubmit paperworkto
is one of the major leakage areas of
claim their SBM incentives.
CASHPOR client income. CASHPOR believes
that providing sanitation facilities helps
to limit unanticipated health expenses,
thereby increasing overall economic
position of the clients. In this way,
better health leads to better economic
opportunities, bigger loans and safer
portfolios: ways for both the clients and
the institution to prosper.
CASE STUDY #9:
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Bank-BC Model IDFC
Bharat, Maharashtra
Introduction
sanitatation
A F
commercial operations as a universal bank
on October 1, 2015. The bank operates in
25 states through its various points of
presence, including core branches, ATMs,
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micro ATMs and BC network. The vision
To meet the Swachh Bharat Mission
of the bank is to deliver banking anytime,
anywhere at scale by using technology to
drive efficiency and set new standards of
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customer experience and convenience.
and enterprise level. This case study
Sanitation and water loans are offered by
is designed to help interested parties
the bank under their retail (non-urban)
learn more about how IDFC Bharathas
portfolio.
successfully integrated sanitation lending
into their normal portfolio of work and
IDFC Bank started sanitation and water
their keys to success.
lending in the financial year 2016-17 and
currently offers these loans to clients
Key takeaway across six states: Madhya Pradesh,
Gujarat, Rajasthan, Karnataka, Tamil
Long-term ODF access and sustainability
Nadu and Kerala. The bank makes these
require: deep understanding of consumer
loans directly to individuals through its
needs, systematic and sustained efforts
retail branches, as well as in a JLG format
at demand creation, and loan sizes that
through its BC network. The bank has
correspond with toilet design/ choice.
made over 63,000 sanitation and water
loans to date, with a repayment rate close
IDFC Bharat - An Overview to 100%. IDFC Bharat Ltd., a 100% subsidiary
of the bank (acquired in 2017), is a business
IDFC Bank, with its origin as an
correspondent for the bank and has been
infrastructure financing company, is
making WSS loans in Tamil Nadu for over
headquartered in Mumbai and started
four years.
Loan Product Loan Amount Interest Maturity Repayment

(₹) Rate Frequency
Sanitation 10,000 – 50,000 20 12 -36 months Weekly and monthly
Water 15,000 – 100,000 20 12 – 36 months Weekly and monthly
Sanitation 10,000 – 100,000 20 12 – 36 months Weekly and monthly

& Water
Sanitation and water loan Demand Generation, Marketing

product development and Borrower Education
In rural areas, the target customer base The process of demand generation starts
for IDFC Bank are the people at the base with training identified WASH staff at the
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of the economic pyramid (BOP), those that branches. Detailed training modules have
are currently under-served or unserved been developed for sensitizing the staff
by the formal financial system. The bank on the many benefits of access to safe
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starts with livelihood financing as the first sanitaton and water solutions, the loan
product for these customers. The other products and monitoring methodology.
needs, including those related to water Each branch has received a product
and sanitation needs, are being financed circular on sanitation and water lending
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subsequently. products, that is updated and re-circulated
at regular intervals. Separate awareness
While assessing customer needs, the creation materials have been prepared
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following five issues were identified as for the customers in order to activate
core for customers that lack access the latent demand for sanitation and
to sanitation and water facilities: water solutions. Printed materials such as
Safety, Hygiene or Health, Productivity, flipcharts and leaflets are used in meetings
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Convenience and Dignity. Solving water with the customers. Posters and banners
and sanitation needs leads to improvement have been placed at the branches.
in quality of life of customers. The bank
conducted a credit needs assessment In Tamil Nadu, IDFC Bharat works closely
for understanding the customer needs. with The Activists for Social Alternatives
Secondary research, including cost (ASA), a not-for-profit serving the poorest
of material, cost of labor and type of of the poor. ASA conducts a series of
toilet structure were considered while training and sensitization meetings to
deciding on the amount and tenure provide health education and to mobilize
for the sanitation loan. The water and clients for sanitation and water loans.
sanitation loan products were launched as Creative posters and innovative health
standalone customized products. A pilot games at the JLG meetings help enhance
project was launched in 4 districts of Tamil awareness and bring behavior change
Nadu, and after successful completion, among the targeted communities. Massive
the product was rolled out across 6 states. awareness campaign such as water testing
The bank considers the sanitation and exhibitions, water day rallies, signature
water loan products as tools for creation campaigns, full stop campaigns, street
of social capital, client retention and, plays etc. have also been key in triggering
consequently, a profitable business demand among the consumers. Live hand
proposition. washing demonstrations are regularly
organized in schools and in JLG meetings
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Sanitation and water loans:
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for sensitizing the communities.
process and monitoring
There is a recognition that schoolchildren Demand for water and sanitation solutions
are ideal change agents who can bring in is triggered at the JLG group meetings.
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the active participation of communities Interested customers can apply for
in issues related to water and sanitation. the required loan at the meeting itself.
Inter-school competitions are regularly Thereafter, credit appraisal is done by the
conducted among children to promote
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field officer along with identification of the
hygienic practices with prizes distributed exact location for the toilet construction.
as a means to encourage participation. The turnaround time for loan disbursement
is around 3-4 days. The customer comes
The bank has developed a detailed Product
to the branch office for receiving the loan
Manual for toilet construction, which is
funds, while all other formalities take place
also given out to customers who avail of
at the customer’s household. The end-
sanitation loans. There are pre-defined
use check begins within 30 days of the
templates for the various toilet designs
loan disbursement. Thereafter, monitoring
and the loan amounts vary depending on
is done till the completion of the toilet/
the design chosen by the client. IDFC Bank
water structure. Before and after images
leaves the decision aboutthe final design,
of the asset are recorded to ensure loan
the mason and the product supplier to the
utilization. Repayments are collected
customer. There are no linkages between
weekly/monthly as per the customer’s
the bank and contractors. The bank follows
convenience. For overall monitoring of
a “do it on your own” philosophy and
the WSS portfolio, IDFC Bank has added
encourages customers to be involved in the
additional manpower at the cluster level.
decisions regarding their sanitation and
water solutions.
Coordination with National  Customized product- IDFC offers a

need-based loan product. The product
Schemes features are specially designed to align
IDFCseesitself as a facilitator vis-à-vis with customer-specific needs and hence
its clients,ensuring that they have the the variations in loan size and tenure.
financial resources to solve their sanitation
 Simplified credit dispensing
and water needs. The bank actively
mechanism- The entire loan process
participates in all stages of water and
is simplified with convenience for the
sanitation intervention, from planning
customer with minimal turnaround time.
through completion, and encourages its
customers to avail of the SBM incentive.  Regular monitoring- There is a robust
process for end-use verification.
What has been key to IDFC's  Huge customer base- IDFC Bank has
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identified a potential customer base of
success in sanitation and water
1.4 million people with sanitation and
lending? water needs. As a distribution strategy,
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 Strong Demand Generation the bank is offering this product
Mechanism- An effective methodology through their core rural branches as well
and approach to demand generation as through the branch network of IBL.
and behavioral change is one of the
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main features of the success of this
Thoughts from the leadership
model. The customers are happy to
have access to this loan facility, as With this loan, IDFC Bank is extending
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earlier such a systematic credit facility convenience to their customers in
was missing. Customers have reported several ways that include safety, health,
benefits like lower health expenses, productivity and dignity. Essentially, with
more dedicated time for income one loan there are multiple conveniences,
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generating activities, convenience and so IDFC Bank positions this loan as “Loan
dignity. Ek Suvidha Anek”.
CASE STUDY #10:
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Enterprise Model
Svadha, Odisha
Introduction
sanitatation
A F
with headquarters in Bhubaneswar,
Odisha. It employs a market-oriented
approach to address the problems of
access to sanitation and hygiene for
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the BPL market in India by integrating
To meet the Swachh Bharat Mission
the entire WASH value chain to provide
access to high-quality, affordable and
sustainable solutions. They aggregate
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significant need for credit, not only for
sanitation products from leading national
households to construct toilets, but also
manufacturers to bypass the typical
the small-scale suppliers who make sure
network of distributors and dealers. At the
the materials for construction are where
same time, they train micro entrepreneurs
last-mile households can access them. This
in sanitation marketing and encourage
case study is designed to help interested
them to target last-mile consumers –
parties learn more about how Svadha is
households that are typicallybeyond
building a model that can serve and scale
the reach of traditional marketing
this market.
channels. From end-to-end, Svadha
performs R&D, product development,
Key takeaway supply chain operations, logistics, service
The role that micro and small enterprises will delivery, and direct sales. In this way,
play in not only reaching but sustaining ODF Svadha’s integrated system not only
is under appreciated and simultaneously creates value from different parts of
holds great market potential. the value chain, but it also develops the
local ecosystems, enhances livelihoods
of microentrepreneurs for economic
Svadha - An Overview sustainability, and accelerates sanitation
Svadha WASH Private Limited (Svadha) access for the improved dignity and health
is a for-profit company founded in 2015 of consumers.
Svadha products and services are adoption of a toilet: a critical factor,

delivered to consumers through their given many people’s complacency with
network of microentrepreneurs who are defecating in the open. The team uses
appointed/recruited and trained by the these results when they design toilet
company. These individuals earn their prototypes that are eventually released
income through profits on product sales to the market. Moreover, because market
and toilet construction services, achieved research has shown that people are more
through economies of scale. To encourage likely to invest in complete solutions rather
more sales, these microentrepreneurs than collect materials and labor from
promote national programs like SBM and multiple sources, Svadha’s approach is to
organize toilet construction materials, provide all of the materials (local as well
skilled and unskilled labor, and even the as national) along with the construction
SBM documentation process from clients services of qualified masons. Post toilet
to make toilet construction as appealing construction, Svadha provides toilet/ pit
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and hassle-free as possible. Svadha maintenance solutions to the consumers.
currently operates across Odisha and
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Bihar. Economies of scale
In appealing to last-mile, low-income
Creating the overall ecosystem consumers, affordability is a critical
factor. Svadha headquarters broker large
for sustainable ODF
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orders with high-quality manufacturers at
Progress against ODF has been hindered reduced prices, and keeping lower margins,
by inefficient and ineffective value chains. enabling them to offer higher-quality
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To ensure successful, sustainable ODF, products at prices within the reach of their
people and small businesses must have clients. In addition, to ensure materials can
access to 1) credit financing, 2) efficient be delivered to the microentrepreneur at
goods, and 3) trained services for toilet an affordable rate, Svadha has designed
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construction. Through its work, Svadhais a route-based distribution system in which
building an organized sanitation the small quantities demanded by the
ecosystem for rural consumers. By microentrepreneurs are aggregated and
providing sanitation ecosystem services, delivered along a specifically-designed
it gradually builds the capabilities of route to reduce the transportation
microentrepreneurs, as well as other cost. Previously, given low demand,
sanitation ecosystem players such as microentrepreneurs were not getting
masons, NGOs, and SHGs. It also builds logistical support from the supplier, which
the ecosystem by bringing in new players: was an inhibiting factor for taking good
CSR foundations recently provided a quality products to the rural market
revolving fund for startup entrepreneurs,
for example.
Market assessment
Svadha uses an administrative block
Product Development as its standard unit and does a Market
Consistent toilet sales require quality Finance, Infrastructure, Institutions and
products, affordable pricing, and Skillset (MFIIS) study to assess the market
consumer demand. A Research & opportunity in a given area. Access points
Development team identifies consumer for the provision of goods and services
preferences that will lead to better to the consumers in that area and the
type and cost of materials available Svadha also explores coordination with
are identified as a means of assessing like-minded NGOs & SHG-promoting
marketing potential as well as bottlenecks institutions through which SHG members
in the existing ecosystem. Svadha also are encouraged to become Svadha
identifies the financial sources available microentrepreneurs. Rather than learn
to the consumers for toilet constriction the “one-stop solution” that the standard
such as governmental incentive programs, microentrepreneurs train to deliver, these
toilet loans or internal surplus capital. SHG members typically focus on any one
Infrastructure such as roads, water, and specific piece of the sanitation supply
electricity are assessed along with the chain: ring manufacturing, toilet cleaning
institutions involved to develop a network accessory sales, etc. Svadha trains these
strategy. Finally, the availability of skilled SHG members and offers a degree of
resources for toilet construction and handholding support to help ensure
microentrepreneurs are assessed.Based on the sustainability of their business. This
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this information, a contextualized strategy activity, besides contributing to their
is designed. livelihood development, additionally assists
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in creating a robust sanitation ecosystem.
Microentrepreneur Training is provided to build effective

identification and training entrepreneurs and sanitation
ambassadors. Major fields of training
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The heart of Svadha’s work lies in its
include sanitation, sales, and marketing
microentrepreneurs, the salespeople who
strategies. Microentrepreneurs are
market and distribute the sanitation
also trained extensively on customer
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products. Microentrepreneurs range from
identification, order placing and supply
village leaders to farmers to housewives
management, government liaison for
and are selected based on a range of
the SBM incentive, mason and laborer
criteria, including: being well-respected
identification, hiring and management,
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in their community; having the desire
customer follow-up, bookkeeping and
to help their community; and having an
financial management, and expanding
entrepreneurial spirit.
their sales force.
Demand generation and

Marketing
Microentrepreneurs are identified based
on an assessment of the person’s ability
to undertake a business in a sustainable
manner. Once identified, Svadha provides
training via mentorstaff who guide them
on successful marketing. A training manual
is given to the microentrepreneurs for easy
reference.
Microentrepreneurs benefit from

awareness raising and behavior
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change communication (BCC) activities
conducted by governments or NGOS to
further ODF goals. Additional demand
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generation for Svadha products is done
through distribution of materials such
as pamphlets as well as communication
through the microentrepreneurs and
Monitoring and construction
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masons, who heavily toilet influence rural verification
toilet designs and material selections. The critical gap in toilet coverage to date
can be attributed in part to the lack of a
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Cash flow for the responsible supply chain that provides
rural consumers access to quality products
microentrepreneur and services for toilet construction.
This theory is the driving factor behind
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Svadha follows an indent-based enterprise
system in which the microentrepreneur Svadha’s model and business proposition.
orders the materials after receiving the Random spot-checks conducted by
order and a down payment from the company management suggest that
customers. By following this model, the increased choice leads to household
microentrepreneurs are not required to toilets that consumers will actually use and
store large amounts of inventory. This maintain over time. Impact is measured
helps in reducing cash flow issues as through microentrepreneur number of
well as the enterprise risk. As demands sales and income earned, although Svadha
increase, however, a microentrepreneur is planning to design a toilet monitoring
typically faces the problem of working and quality certification in partnership
capital shortfalls. To meet that need, with a like-minded partner organization.
Svadha offers a 30-day credit to the
microentrepreneur and provides
financial training, including a basic
Coordination with National
financial management template. The Schemes
company is also planning to link their The relationship between the government’s
microentrepreneurs to bridge loans from SBM program and Svadha’s core business
MFIs or Banks. is mutually beneficial: SBM creates the
demand, and Svadha address the supply. 2. Complete Solution Approach – Providing
By building a cadre of last-mile toilet the consumer convenient, one-stop
entrepreneurs and skilled masons, Svadha solutions.
is helping the SBM targets to be achieved.
3. IT Integration – Digital platforms reduce
Increasing the choices in materials and
the transaction cost.
trained masons at the last mile encourages
households to take advantage of the 4. Collaboration – Power in numbers:
government incentive where they might negotiating the best economies of scale
have previously been reluctant. Meanwhile, for its microentrepreneurs as well as
the SBM incentive is an appealing demand generation.
marketing strategy for last-mile sanitation
business. For that reason, Svadha trains its
Thoughts from the leadership
microentrepreneurs on toilet construction
with strict adherence to Government Svadha means “comfort” in Sanskrit.
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guidelines in addition to how to help Appropriate sanitary solutions have a
clients claim the incentive. direct impact on people’s health and
income and, subsequently, on their
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standard of living.Sanitation is a complex
What has been Svadha'skey problem, dealing with market forces and
to success? human behaviour. Svadha seeks to address
that problem with human-centric and
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Key success factors include:
market-based innovation.
1. Effective Engagement Strategy
– Utilizing a market-based rural
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communication strategy.
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CASE STUDY #11:

Building an integrated
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WSS ecosystem
Maharashtra
Introduction
The District Eco-System Approach
being piloted in Maharashtra to
A
sector in Maharashtra
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Credit financing in the WSS
Maharashtra, a state which has achieved
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99% IHHL1 coverage and is on track
support linking Credit Financing with
to become ODF by March 31, 2018 is
ODF progress, and ODF-S plan increasingly recognizing the need for
While large strides have been made an additional sanitation finance model
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towards achieving the SBM mandate in to supplement state efforts. For people
each state, as the date of October 2nd, to sustain use of toilets, in addition to
2019 draws closer, alternativefinancial behavior change measures, funds will be
models will need to be explored to needed for operation and maintenance,
accelerate current progress and address safe collection and disposal and to
newly-arising sanitation demand in rural upgrade and retrofit toilets. Moreover,
India.As the SBM’s focus shifts from ODF to there will always be demand for new toilet
post ODF sustainability, and government construction.
funding tapers off, lack of government
funds for safe household- based sanitation Poor households are unable to meet
interventions will be one of the primary these costs upfront, which risks potential
bottlenecks to sustained toilet use and slippage in ODF. Therefore, a pro-poor
ODF coverage, especially among the poor. financing solution is necessary for
households to access affordable finance
Key takeaway which will enable them to construct

improved toilets.
If the demand generation activities
and financial lending programs can be SHG federations, microfinance
harmonized, there is significant potential organizations, and universal banks are
to achieve scale. already providing or facilitating small,
1
Data taken from SBM IMIS – www.sbm.gov.in/dashboard
affordable and easily repayable microloans institutions to offer WSS financing to low
for water and sanitation to households to income households, who want improved
construct toilets. A considerable evidence sanitation but cannot self-finance as a
base has been built demonstrating bulk cost. In the long run, other larger
success of this model in the state, with financial lenders like Public Banks/
more than 38,490 families accessing IPPB/SFBs etc. will also integrate within
microloans for water and sanitation, ecosystem.
with an average repayment rate of 98%.2
Additionally, supportive government policy The outcome of these pilots is to
has also boosted the funding landscape demonstrate a replicable self-sustaining
and has provided an added impetus for model that can be scaled and
private sector and institutional financing contextualized to other district and states.
to flow into the WSS sector.3
Implementation framework
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Given the success of this existing model,
UNICEF and Water.org are collaborating to For the approach to be successful,
pilot a district wide eco-system approach, implementation is being carried out at
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in 6 districts in Maharashtra, that will three functional levels of the district eco-
integrate the rural household WSS credit system:
financing programs with the larger eco-
A. District/State level stakeholders
system of district wide ODF planning and
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implementation. B. Block Level stakeholders
C. Gram Panchayat/ Village Level

District ecosystem approach - stakeholders
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Maharashtra a. District/Stake level stakeholders:
The basic premise of the approach is two The primary intervention at the
pronged 1) Linking demand generation for state and district level is advocacy
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WSS financing with a district’s sanitation efforts among key decision makers
behavior change communication (SBCC) such as the Principal Secretary,
and other demand generation efforts, SBM Director, MSRLM CEO, District
2) Aligning district SBCC activities with Administrators, S/DLBCs and other
various financial institutions who provide key stakeholders. The objective
WSS credit services. When there is demand is to advocate for and present
within community to take a loan and evidence on successful examples of
self-construct, and the rapid ease of household WSS financing programs,
taking a loan from multiple RBI regulated the potential these solutions have
financial players, the coordinated result to support additional funding
will be higher demand generation requirements for ODF and ODF-S
within eco-system and rapid scaling of and introduce the district eco-
solutions, which meets household and system approach.
entrepreneurial needs for affordable b. Block Level stakeholders – The
financing. blocks are envisioned as the most
important functional level as all
It currently aligns institutions such as
the development activities are
State Rural Livelihood Mission (MSRLM),
executed and managed at the
MAVIM as well as district and block level
block. The Block Development
SHG/microfinance and alternative banking
Officers, Extension Officers, Block
Advocacy District
Advocacy and Planning
with State CS/PS, SPLM
CEOs, SLBC, DM/DC
Training & Block Level Intervention

Capacity Building Capacity Building and Training of
Trainers with BRPs, CRPs, Swachhata
Doots on Financing for WSS
Financial IEC
GP Level Intervention
& Demand IEC/SBCC and Demand Generation at the GP/Village through CRPs/
Generation Community Mobilizers, WSS Champions, PRI officials, community leaders,
Front Line Workers
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Financial Institutions
Training
Capacity building for Financial Institutions such as MSRLM, MAVIM, Small Finance Banks, MFIS, SHPIs
& IEC for etc. to provide WSS financing options to community
Demand a. Training of Trainer Workshops on WSS program development
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Generation b. WSS IEC for Demand Generation
Resource Persons etc. will be trained promotion and financial inclusion to

as Master Trainers on ODF–S in provide WSS lending to households.
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relation to WSS Financing, demand
In addition to training and IEC for the SBM
generation and Financial IEC. The
stakeholders, financial institutions will also
role of the master trainers is to
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be trained on demand generation and
provide trainings at the GP level
effective implementation of WSS financing
to frontline workers, community
programs.
mobilizers, key SHG members and
other PRI members on various
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aspects of WSS financing solutions, Planned interventions at the
behavior change, credit linkage,
SLWM and ODF-S.
district level
To support implementation, the following
c. Gram Panchayat Level stakeholders
interventions have been planned at the
including Financial Institutions –
district levels. It is important to plan the
Capacity building of stakeholders
three steps in sequential manner for
at the GP level on benefits of WSS
optimal success.
financing and the need for ODF-S
will ensure a strong demand for a. Advocacy and Assessment of Financial
building water and sanitation Inclusion potential which includes:
assets in the target areas. However,
 Mapping of state, district and block
not all demand can be met by the
level financial partners with district
household through self-financing
ODF-S plan
options. Therefore, there will be a
need for financial institutions such  Rapid Needs Assessment (RNA) of
as credit-linked SHGs of MSRLM, the financial inclusion potential at
MAVIM, SHG Federations, MFIs, the district and block level
Banks etc. who work very closely
 Inform local stakeholders (GP/PRI/
with the community on livelihood
PRS/ANM/CM/Asha etc.) that credit
financing for sanitation and water is MSRLM led SHG groups, Village
approved under RBI guidelines and Organizations and PRI members on
can be used independently or as a WSS financing
complement to SBM incentive (as
c. Financial IEC and Demand Generation
applicable).
 Design financial IEC integrated
 State Level Orientation Workshops
with SBCC for households, service
with representatives from the Water
providers & financial institutions
Supply Sanitation Department,
CEO of the SRLM, MAVIM, District  Public engagement by the BRPs
Administrators, ZillaParishad CEOs, and CRPs at the village/GP level on
SLBCs and other key decision household WSS financing
makers on RNA results and
 Identify WSS champions at the block
demonstrated success of the WSS
and village level to trigger loan
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financing model.
demand within community.
 Encourage all financial players at
 Design community- based mass
district/block (PSBs/RRBs/Private
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campaigns to generate demand for
Banks/SFBs/MFIs/ BCs) to support
WSS financing
credit financing as a product for
both IHHLs and MSMEs.  Integrate WSS financing IEC into the
yearly district IEC Planning for SBM
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 Create and maintain an active list
and District ODEP.
of financial institutions that offer
sanitation and water loans with
Expected outcomes
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contact details. Provide information
to people who have funding needs. The primary outcome is to develop a
b. Training and Capacity Building sustainable and rapid-scalable financing
model for the state to support and sustain
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 Developing WSS credit financing ODF and ODF-S through alternative
modules to be integrated into funding.
training programs for Front-Line
workers, Community and Block If the demand generation activities
Resource Persons, Health Workers, and financial lending programs can be
SHG groups. harmonized, there is significant potential
to achieve scale, especially since this
 Training of district and block level
model is designed for low-income
teams of SBM, SRLM and other
households to access WSS improvements.
departments on WSS financing
 Building institutional capacity at the In addition, an alternative financing

village level of GPs and the statutory model through banks and other financial
committees. institutions can also support the district
government(s) by potentially funding
 Training of Trainers on WSS financing micro-enterprises such as rural sanitary
for financial staff of MSRLM, MAVIM, marts, fecal sludge management business
SHG Federations, etc. models, solid liquid resource management
 Capacity building of Front Line and other businesses around the emerging
workers, Community Mobilizers, sanitation supply chain market.
CASE STUDY #12:

Integrating credit
financing with the SBM
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incentive Dharwad,
Karnataka
Introduction
The success of integrating the SBM
incentive with credit financing to
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As of February 2018, Karnataka has
achieved 87.35% ODF coverage overall,
and Dharwad is amongst the 311 districts
of India that have been declared ODF.
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support ODF progress This designation was not achieved until
While large strides have been made recently, however. The problem of people
towards achieving the SBM mandate in not building and using toilets despite the
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each state, as the date of October 2nd, 2019 district’s best efforts forced Dharwad Zilla
draws closer, alternative financial models Panchayat CEO, Smt. R. Snehal, to take a
will need to be explored to accelerate critical look at ODF bottlenecks in July 2017.
current progress and address newly-arising Investigating the situation, she realised
sanitation demand in rural India. that while many people understood the
benefits of having a household toilet,
Key takeaway they were not constructing them because
Government-bank collaboration to they lacked the up-front capital required
integrate SBM incentives and access to to purchase materials or pay for labour.
finance is not only possible, but it works. Moreover, consecutive droughts made
people less motivated to invest in systems
ODF and the need for credit that required additional water use.
financing in Dharwad
To consider options for achieving SBM-G
Dharwad is a district located in the northern
targets, a meeting was called between the
part of Karnataka state; Dharwad city is
the district headquarters and forms half of State Level Bankers Committee (SLBC),
the Hubli-Dharwad twin cities metropolitan the Additional Chief Secretary, and the
area. The district is further divided into five Development Commissioner. Subsequently,
blocks, also known as taluks. the SLBC passed a resolution to support
SBM-G by lending to eligible households Guidelines, terms and conditions

for toilet construction. To facilitate this,
they devised a unique approach: delivering
of the incentive arrangement
the incentive directly to the beneficiary’s The Dharwad Zilla Panchayat was
determined to catalyse progress towards
loan account upon completion of the
its SBM-G goals, and they set a target of
toilet. The bank then used that incentive
a total of 45,261 total toilets to be built. A
to settle the loan. Moreover, as a means
sub-target for the number of toilets to be
of encouraging eligible households to
constructed via their credit experiment
participate, the district pledged to pay the
was not developed, given the team did not
interest accrued on any loans that did not know what to expect. Incentive amounts
receive the incentive pay-out within three were structured to align with the resolution
months. passed by the Karnataka government to
support SBM-eligible households: ₹12,000/-
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Based on the resolution passed by the
for the ‘general’ category, ₹15,000/- for
SLBC, the district held a District-Level
people classifying as SC/ST, and ₹19,000/-
Consultative Committee (DLCC) meeting for SC/ST who intended to construct
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involving block-level bank coordinators Gaurava Ghataks (Toilet-cum-Bathrooms).
and the managers of all public banks and
regional rural banks located in the district. Eligibility criteria:
The Chairperson of the committee, the  Borrower should already have an
A
Dharwad Zilla Panchayat CEO, explained account in the bank from which s/he is
the scheme details to the attendees getting the loan.
and requested banks to volunteer to
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 Borrower should not have been a
participate in the scheme. To ensure
recipient of assistance any previous
the message reached as far as possible
state or central government scheme
within the district, a block-level bankers regarding the construction of toilets.
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committee meeting was held at each of
the five blocks in the district to discuss  Possession of a Work Order by
Panchayat Development Officer (PDO)
the terms and condition of lending to
the eligible households. Two banks came
Terms and conditions:
forward: Karnataka Gramin Bank and
 The incentive amount to be credited to
Vijaya Bank.
the borrower’s Saving Bank (SB) account
This concept proved successful. Within upon completion of construction of the
a span of eight months, a total of 1,910 toilet.
loans were disbursed, amounting to ₹2.29  If the borrower does not receive the
crores, and 100% of the borrowers got allotted incentive amount from the State
the toilets constructed. The district was government within the three-month
able to deliver incentive pay-outs to all period, the Dharwad Zilla Panchayat will
the borrowers within the three-month pay the interest on the loan from the
timeframe. district IEC fund until the incentive is
transferred to the borrower’s SB account.
Terms and conditions, in detail

Number Detail Terms and Conditions
1 Purpose of loan For construction of toilets in rural areas under SBM
2 Amount of loan Maximum of ₹12, 000/- to ₹19,000/- per unit
3 Rate of Interest 10% - 11%
4 Service charges Nil
5 Repayment period Total Repayment period is 36 months with initial

moratorium period of 1 year. Thereafter at half yearly
/yearly intervals along with interest. Note that there
is no interest to be paid by the borrower if the
incentive is delivered within 3 months.
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6 Security Nil
7 Surety Nil
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8 Margin Nil
9 Documents required 1. SB account
2. Work order from Panchayat Development Office

(PDO)
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10 Sanction of loan Loan to be sanctioned within 2 days of getting
Work Order from the PDO.
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11 Release of loan Released to the SB account of the beneficiary in
one lump sum.
12 Work supervision The Gram Panchayat will supervise the progress of

work and will produce completion/utilization report
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with photo
13 Incentive The Govt. of India/Govt. of Karnataka will provide

incentive directly to the SB account of the beneficiary
at the following rates:
1. BPL categories: ₹12,000/-
2. SC/ST categories: ₹15,000/-
3. Restricted APL, SF/MF, Female-Headed

Households, Physically Handicapped, Landless
labourers having a homestead: ₹12,000/-
4. SC/ST: ₹19,000/- for Toilet-cum-Bathroom
Demand Generation ensuring BPL families would be willing to

take loans. Creating demand amongst
New concepts always require a big
the BPL was achieved by utilizing the
marketing campaign, formal or informal,
entire administrative machinery: Block
to gain support. When the supply
Development Officers, Circle Officers, Gram
side of the project was organized (e.g.
Panchayat staff, Anganwadi workers, etc.
willing banks had been identified), the
Sanitation marches were conducted across
team had to address the demand side:
the district to raise awareness amongst the last-mile Anganwadi workers,

the masses. Finally, major emphasis was created a buzz of urgency and sincerity
placed upon educating schoolchildren which led people to apply for loans to
about options for taking loans so that they construct their toilets.
would spread the message to their families.
 Simple loan process: The ease of
availing loans and protection against
What was key to the success delayed incentive pay-out made
the process hassle-free and clear.
of this initiative? No margin money and a one-year
Several factors combined to make this moratorium along with 36 months’ loan
experiment successful: tenuremade the loan product attractive.
 Innovation in addressing the finance  Multiple loan products: People willing

gap: Availability of up-front capital to construct bathing space and people
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for toilet construction is always a from different strata of the society were
bottleneck for BPL households. Finding targeted with different loan amounts.
a creative solution to address pre- This allowed flexibility in terms of
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incentive financing enabled many building the desired structure, which
households to invest. helps ensure that families will use the
toilets once they have been built.
 Administrative support: Mobilization of
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the entire administration staff, including
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CASE STUDY #13:

Established MOU and
targets with Financial
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Institutions Madurai,
Tamil Nadu
Introduction
Demonstrate the success of
financial institution and district -level
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coverage,1 is increasingly recognizing the
need for additional sanitation finance
models to supplement state efforts. In
addition to behavior change measures,
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collaboration to support ODF progress funds will be needed for operation and
maintenance, safe collection and disposal
While large strides have been made towards
and to upgrade and retrofit toilets. Poor
achieving the SBM mandate in each state,
households are unable to meet these costs
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alternative financial models will need to be
up-front. A pro-poor financing solution
explored to accelerate progress and address
in which households can access credit to
rising sanitation demand in rural India.
construct improved toilets is required.
Key takeaways SHG federations, microfinance

organizations, and universal banks
 Direct, formal partnerships can move all
are already providing or facilitating
partners further towards a shared goal
small, affordable and easily repayable
faster.
microloans for water and sanitation to
 Collaborating with organizations that households for toilet construction. A
have deeply-embedded social structures considerable evidence base has been built
can make systems more efficient. demonstrating success of this model in
the state, with more than 2,89,651families
ODF and the need for credit accessing credit financingfor sanitation
and water, with an average repayment rate
financing in Madurai, Tamil Nadu of 98%.2 Supportive government policy
Tamil Nadu, a state which has achieved has additionally boosted the funding
93.4% Individual Household Latrine landscape and has provided an added
1
Data taken from SBM IMIS – www.sbm.gov.in/dashboard
2
Data as of January 2018 from water.org. Loans for WSS range from ₹10,000 – 25,000 depending on a family’s requirements for
water points, toilets, toilet with bathing facilities, water storage facilities etc.
impetus for private sector and institutional  Number: 2,500 household toilets
financing to flow into the WSS sector.3 constructed by SBM-eligible
households
Madurai district is in southernTamil Nadu;
Madurai city is the district headquarters. - Households to come from 60
The district is further divided into 17 blocks, panchayats within six blocks of
otherwise known as taluks, with distinction the district
made between Madurai Rural and Madurai - Toilets must align with SBM/DRDA
Urban. As of February 2018, Madurai is specifications
amongst the 312 districts of India that have
 Provided or Contributed by DHAN
been declared ODF. In March 2016, however,
Foundation
Madurai district only reported 57.71%
individual household toilet coverage.  Beneficiary identification and loan
marketing
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Third-party collaboration  Loan disbursement through
Madurai District Rural Development its standard model (SHGs) for
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Agency (DRDA) Additional Collector, sanitation
IAS officer Rohini Ramdas, had already  Responsibility for funds borrowed
gained national recognition for her “K to above SBM incentive amount
K” sanitation program when the locally- (₹12,000/-)
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headquartered NGO, DHAN Foundation,4
 Sanitation BCC activities
approached her with the idea of formally
uniting to facilitate toilet construction.  Technical support from its Civil
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She was eager to achieve ODF in the Engineers
district before she was transferred, and a
 Provided or Contributed by DRDA
Memorandum of Understanding (MOU)
was signed between Madurai DRDA and  Authorization of all beneficiaries
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DHAN Foundation after only one day, on submitted by DHAN through this
September 14, 2016. The MOU set targets scheme
for DHAN Foundation to facilitate 2,500
 Necessary approvals, if needed, from
household toilets in 60 panchayats of six
concerned authorities in identified
blocks within the district by December
60 panchayats
31, 2016. DHAN Foundation exceeded that
target and oversaw the construction of  Managing the SBM incentive
2,762 toilets in that timeframe.
 DRDA commits to delivering DHAN
beneficiaries the ₹12,000/- incentive
The framework as outlined in as follows:
the MOU - 50% within 8 days of materials

The MOU is included as Annexure E. Features being purchased and located
of the agreement are highlighted below. on-site
- 50% within 8 days of completion

 Targets
13
The RBI in 2015, in support of Swachh Bharat Mission, declared water and sanitation as a Priority Sector within the larger
category of social infrastructure lending. In 2017, the Ministry of Rural Development, supported by the MDWS, included sanitation
as an eligible loan product under the NRLM guidelines.
4
Detailed case study of DHAN Foundation provided as Case Study #7
SHG lending for sanitation - similar way, but demonstrate reluctance to

sign official MOUs.
the DHAN Foundation model
DHAN Foundation has been lending
through its SHG federations for sanitation
The value of an MOU
since 2013. SHGs are linked with banks DHAN Foundation had worked in close
and given the minimum interest rate on collaboration with district authorities,
bulk loans. The toilet loan is ₹25,000/- including the Madurai DRDA, in the
intentionally above the SBM incentive past. Having an official MOU in which
amount – the team believes borrower both parties are committed to certain
contributions instill a sense of ownership. deliverables enables the overall system to
function much more efficiently, a major
Upon receiving the loan, borrowers are factor in the parties exceeding their toilet
responsible for purchasing the materials target.
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and hiring a mason to construct their
toilet. DHAN Foundation requires According to DHAN Foundation’s Health
borrowers to use one of its approved and Sanitation Programme Leader, R.
F
masons (who have undergone their training Rajapandian, there are two chronic
programs and are therefore knowledgeable bottlenecks that typically slow the
about constructing in accordance with construction of toilets. The first is the
SBM guidelines, and who are held to strict timely release of the SBM incentive to the
A
rules about what they are able to charge a beneficiary. Because borrowers are paying
client). interest on the loan, the delay in incentive
delivery can have serious implications on
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low-income households.
Incentive release authorization
DHAN Foundation certifies that the The high and unpredictable turnover
requirement has been met for releasing the of key collaborators within the local
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final tranche of funds, including taking a government, such as District Collectors,
photo of the beneficiary and the new toilet. Block Development Officers, or officials
The BDO engineer and the Panchayat Clerk at the DRDA level, is the other critical
later visit and confirm. As a well-connected challenge for DHAN Foundation or any
member of the community, the Panchayat other organization that works alongside
Clerk’s participation prevents against the government. Bringing a new official up
misuse of funds. Funds are released from to speed on activities takes a lot of time
the Panchayat to the beneficiary’s account. away from engaging in the actual work,
and it is not uncommon for a new official
to have different priorities or take less of
Moving forward an interest in the work. (The enthusiasm of
Shortly after the achievement in Madurai, DRDA Additional Collector Rohini Ramdas
Additional Collector Rohini Ramdas for the collaboration, for example, is how
was transferred to Salem district, where the MOU was able to be designed and
she signed another MOU with DHAN signed by both parties in one day.) Having
Foundation in November 2017. This an MOU with the government offers the
MOU has the agreed-upon target of partner organization (in this case, DHAN
constructing 8,000 toilets over seven Foundation) security against the turnover
months. Other districts have come forward risk, which is especially important when the
and expressed interest in collaborating in a government is making special provisions
around incentive delivery.
What factors have been key to constructed, reducing the waiting time that
sometimes plague activities that depend
success in this partnership? upon government verification. Its network
Throughout the collaboration, there was of SHGs and its seasoned experience in
heavy coordination between Madurai lending for sanitation were also of critical
District and DHAN Foundation – achieving value.
2,762 toilets in three months would have
been incredibly challenging. DHAN’s long- “If a District Administration is willing to
standing reputation within the community partner with NGOs,” observed Rajapandian,
made the Madurai DRDA comfortable “this is the right model for NGOs to help
in trusting the DHAN staff to execute districts achieve SBM. 80% of the BPL
many activities that its staff usually households are members of SHGs, and
carry out in the field, such as the DHAN SHGs also have very high – possibly the
team certifying that a toilet has been highest – repayment performance than any
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group.”
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D R
CASE STUDY #14:

Voice of Customer:
Reflections of various
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credit customers: Video
(Pan-India)
A F
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[Refer to Video]
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One-page Guidance
15. One-page Guidance Note for SBM Mission Directors
1) Basic information on the topic banks should direct their credit. Refer: RBI
To meet the SBM state target of 100% circular FIDD.CO.Plan.BC.4/04.09.01/2015-16
sanitation coverage and ensure ODF dated July 1,2015.
sustainability, there is significant need
Inclusion of toilet construction as a
for credit atthe household and micro
category for Self Help Groups (SHGs) linked
enterprise level. Credit is needed to serve:
T
to State Rural Livelihood Missions (SRLMs)
households that were left out of the
to avail loans. Refer: RBI FIDD.GSSD.CO.BC.
SBM baseline survey, households with
No.04/09.01.01/2017-18 dated July 1, 2017.
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dysfunctional toilets; households with
toilets in need of upgradation; and Micro,
3) Partners
Small and Medium Enterprises(MSMEs)
that support the sanitation supply chain. Water.org; UNICEF; India Sanitation
Coalition (ISC); Finish Society; CEPT
A
Over the past decade, close to 13 lakh University; Dalberg, Dasra
loans, aggregating over ₹1,865 crores,
have been made in 17 states for sanitation 4) Who you can talk to:
R
and water, reaching approximately 60
UNICEF: Sujoy Mazumdar, WASH Specialist-
lakh people. 60% of the loans have been
smazumdar@unicef.org;
disbursed for toilets, with the remaining
40% of loans disbursed for water systems. Water.org: Vedika Bhandarkar, MD-
D
These loans have been made directly by vbhandarkar@water.org; Manoj Gulati, ED-
banks or with the help of last-mile partners mgulati@water.org;
such as small finance banks, micro finance
institutions, and credit-linked SHGs. Svadha (MSME): KC Mishra, MD-
kcmishra40@gmail.com;
SBM Directors play a keyrole in leading
state-level credit linkage for SBM-G by CASHPORMicro Credit: PS Hooda- Dy. MD-
ensuring that appropriate financial deputymd@cashpor.in;
linkages are in place to inspire people to
DHAN Foundation: R. Rajapandian,
act. The citizens of Etah district (UP) have
rajapandian@dhan.org;
proven that people are motivated to self-
finance their toilets when they havesuitably Dharwad Zilla Panchayat: Mrs. R. Snehal,
motivated(SBM-G word press; Dec 4, 2017). CEO- ceo.dwd@gmail.com;
2) Policy framework IDFC-Bharat: Arjun Muralidharan, CEO-

arjun.m@idfcbharat.com;
Designation of drinking water and
sanitation as Priority Sector Lending (PSL)
Shanmugaraj R-shanmugaraj.r@gvmfl.com
towards which banks and regional rural
5) Support tools for advocacy (case 6) Actions for SBM Mission Directors
studies and videos) (What can youdo?)
a. Voice of Customer: Reflections of a. Inform state stakeholders that credit
various credit customers: Video financing for sanitation and water
(Pan-India) isapproved under the RBI guidelines
and can be used independently or
b. SHG Model: Case Study + Video
as a complement to SBM incentive
(DHAN Foundation, Tamil Nadu)
(as applicable).
c. MFI Model: Case Study + Video
b. Encourage all financial players in
(CASHPOR Micro Credit, Uttar
the state (PSBs/RRBs/Private Banks/
Pradesh)
SFBs/MFIs/ BCs) to support credit
d. Bank-BC Model: Case Study + Video financing as a product for both
(IDFC Bharat, Tamil Nadu) IHHLs and MSMEs.
T
e. Building ODF-S through Supply c. AdviceSLBC to increase credit
Chain: MSME Case Study (Svadha, linkage/bulk lending through SRLM/
F
Odisha) SHGs/JLGs/MSMEs for toilets.
f. Building Integrated District Level d. Establish State credit-linked

WSS Ecosystem: Case Study sanitation goals and action
(Maharashtra) plans;initiate MOUs with SHGs/
A
MFIs/ Banks/financial institutions
g. Integrating credit financing with the
(refer case study Madurai, TN).
SBM incentive: Case Study+ Video
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(Dharwad, Karnataka) e. Support Distt. CEO/DDC/DPRO and
banks to integrate SBM incentive
h. Established MOU and targets with
(case study Dharwad, KA).
Financial Institutions: Case Study
(Madurai, Tamil Nadu)
D
16. One-page Guidance Note for District Collectors

1) Basic information on the topic Inclusion of toilet construction as a
To meet the SBM target of 100% sanitation category for Self Help Groups (SHGs) linked
coverage and ensure ODF-S success, there to State Rural Livelihood Missions (SRLMs)
is significant need for additional funds for to avail loans. Refer: RBI FIDD.GSSD.CO.BC.
households and micro enterprises. Credit is No.04/09.01.01/2017-18 dated July 1, 2017.
needed to serve: households that were left
out of the SBM baseline survey, households 3) Partners
with dysfunctional toilets; retrofitting, Water.org; UNICEF; India Sanitation
households in need of toilet upgradation; Coalition (ISC); Finish Society; CEPT
and MSMEs (micro, small and medium University; Dalberg, Dasra
enterprises) that support the sanitation
T
supply chain. 4) Who you can talk to:
Over the past decade, close to 13 lakh UNICEF: Sujoy Mazumdar, WASH Specialist-
smazumdar@unicef.org;
F
loans, aggregating over ₹1,865 crores,
have been made in 17 states for sanitation
Water.org: Vedika Bhandarkar, MD-
and water, reaching approximately 60
vbhandarkar@water.org; Manoj Gulati, ED-
mgulati@water.org;
A
disbursed for toilets, with the remaining
40% of loans disbursed for water systems. Svadha (MSME): KC Mishra, MD-
These loans have been made directly by kcmishra40@gmail.com;
R
banks or with the help of last-mile partners
such as small finance banks, micro finance CASHPORMicro Credit: PS Hooda- Dy. MD-
institutions, and credit-linked SHGs. deputymd@cashpor.in;
DHAN Foundation: R. Rajapandian,
D
District Collectors play a critical role in
increasing lending efforts to achieve rajapandian@dhan.org;
ODF and ODF-S goals by facilitating
Dharwad Zilla Panchayat: Mrs. R. Snehal,
sanitation credit financing with DLCC,
CEO- ceo.dwd@gmail.com;
SRLM, Banks, BCs, MFI’s and other financial
organizations as needed. The citizens of IDFC-Bharat: Arjun Muralidharan, CEO-
Etah district (UP) have proven that people arjun.m@idfcbharat.com;
are inclined to self-finance their toilets
when appropriately motivated (SBM-G word Shanmugaraj R-shanmugaraj.r@gvmfl.com
press; Dec 4, 2017).
5) Support tools for advocacy (case
2) Policy framework studies and videos)
Designation of drinking water and a. Voice of Customer: Reflections of
sanitation as Priority Sector Lending (PSL) various credit customers: Video (Pan-
towards which banks and regional rural India)
banks should direct their credit. Refer: RBI
b. SHG Model: Case Study + Video (DHAN
circular FIDD.CO.Plan.BC.4/04.09.01/2015-16
Foundation, Tamil Nadu)
dated July 1,2015.
c. MFI Model: Case Study + Video water is approved under RBI guidelines
(CASHPOR Micro Credit, Uttar Pradesh) and can be used independently or as
a complement to SBM incentive (as
d. Bank-BC Model: Case Study + Video
applicable).
(IDFC Bharat, Tamil Nadu)
b. Convene meetings with financial players
e. Building ODF-S through Supply Chain:
in district (PSBs/RRBs/Private Banks/
MSME Case Study (Svadha, Odisha)
SFBs/MFIs/ BCs) to support credit
f. Building Integrated District Level WSS financing as a product for both IHHLs
Ecosystem: Case Study (Maharashtra) and MSMEs.
g. Integrating credit financing with the c. Establish goals, action plansand MOUs
SBM incentive: Case Study+ Video with SHGs/financial institutions (Refer
(Dharwad, Karnataka) case: Madurai, TN).
T
h. Established MOU and targets with d. Support District CEOs/DDC/DPROand
Financial Institutions: Case Study banks to integrateincentive (Refer case:
(Madurai, Tamil Nadu) Dharwad, KA).
F
e. Encourage DLCC to increase credit
6) Actions for DistrictCollectors
linkage/bulk lending with SHGs/JLGs/
(What can youdo?) MSMEs.
a. Inform BDO, PRI, PRS, CDPO, MO, GP, etc.,
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that credit financing for sanitation and
D R
17. One-page Guidance Note for Front-line Workers

1) Basic information on the topic to State Rural Livelihood Missions (SRLMs)
To meet the SBM target of 100% sanitation to avail loans. Refer: RBI FIDD.GSSD.CO.BC.
coverage and ensure ODF sustainability, No.04/09.01.01/2017-18 dated July 1, 2017.
there is significant need for household
and Micro, Small and Medium Enterprise 2) Partners
(MSME)-level credit. Credit is needed to SRLM, SHGs, MFIs, Banks, Bank Business
serve: households that were left out of Correspondents, UNICEF, Water.org
the SBM baseline survey, households with
dysfunctional toilets; households with 3) Who you can talk to:
toilets in need of upgradation; households
Talk to your local SHG and JLG
that are not eligible to receive the SBM
representatives for sanitation loan
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incentive; and MSMEs that support the
facility. Discuss the same with your block
sanitation supply chain.
coordinator, Gram Pramukh, PRI workers
and Asha workers. Ask your District Level
F
Over the past decade,close to 13 lakh
loans, aggregating over ₹1,865 crores, Consultative Committee (DLCC) member
have been made in 17 states for sanitation how more funds can be made available
and water, reaching approximately 60 within your district for sanitation and
water.
A
disbursed for toilets,with the remaining
40% of loans disbursed for water systems. 4) Support tools for advocacy (case
These loans have been made directly by studies and videos)
R
banks or with the help of last-mile partners a. Voice of Customer: Reflections of
such assmall finance banks, micro finance various credit customers: Video (Pan-
institutions, and credit-linked SHGs. India)
D
The Front-line teamplays the most critical b. SHG Model: Case Study + Video (DHAN
role in buildinglocal awareness of credit Foundation, Tamil Nadu)
(micro-loan) for toilets is now available. This c. MFI Model: Case Study +
team needs to inspire people to prioritize Video(CASHPOR Micro Credit, Uttar
toilet construction by taking a loanbased Pradesh)
on the merits that toilet ownership
brings:time savings, health, productivity, d. Bank-BCModel: Case Study + Video
and prestige. (IDFC Bharat, Tamil Nadu)
e. Building ODF-S through Supply Chain:

Policy framework
MSMECase Study (Svadha, Odisha)
Designation of drinking water and
sanitation – as priority sector lending (PSL) f. Building Integrated District Level WSS
towards which banks and regional rural Ecosystem: Case Study (Maharashtra)
banks should direct their credit. Refer: RBI
circular FIDD.CO.Plan.BC.4/04.09.01/2015-16 5) Actions for front-line workers
dated July 1,2015. (What can youdo?)
a. Inform all local administrative
Inclusion of toilet construction as a
stakeholders like GP/PRI/PRS/ANM/
category for Self Help Groups (SHGs) linked
CoM/Asha etc. that credit financing
(taking loans) for sanitation and water Micro Finance Institutions and Banking
is approved under RBI guidelines and Business Correspondents.
can be used both independently or
c. Create a list of financial institutionsthat
as a complement to SBM incentive (as
offer sanitation and water loans with
applicable).
contact details. Provide information
b. Meet and encourage all local financial to all people who have sanitation and
institutions to provide credit financing water funding needs.
(loans) for both individual households
d. Ask for specific posters, banners and
and MSMEs. This includes Public
other IEC material that help build
Sector Banks, Regional Rural Banks,
awareness on credit finance becoming
Private Banks, Small Finance Banks,
available for sanitation and water.
F T
R A
D
44 Annexure
Annexure A
RBI/2015-16/53 FIDD.CO.Plan.BC.4 /04.09.01/2015-16 July 1, 2015
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The Chairman / Managing Director/ (Amended up to
Chief Executive Officer December 15, 2015)
[All Scheduled Commercial Banks,
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(excluding Regional Rural Banks)]
Dear Sir/ Madam,
A
MASTER CIRCULAR-PRIORITY SECTOR LENDING-TARGETS AND CLASSIFICATION
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The Reserve Bank of India has, from time to time, issued a number of guidelines/
instructions/directives to banks on Priority Sector Lending. In order to enable the banks
to have current instructions at one place, a Master Circular incorporating the existing
guidelines/instructions/directives on the subject has been prepared and enclosed.
D
This Master Circular consolidates the current instructions on ‘Priority Sector Lending-
Targets and Classification’ and the circulars/ mail box clarifications issued on the
subject up to December 15, 2015 as indicated in the Appendix.
2. The guidelines on priority sector lending were revised vide our circular datedApril 23,
2015. The priority sector loans sanctioned under the guidelines issued prior to April 23,
2015 will continue to be classified under priority sector till repayment/maturity/renewal.
3. Please acknowledge receipt.
Yours faithfully,
(A.Udgata)
Principal Chief General Manager
Annexure 45
I. Categories under priority The details of eligible activities under

the above categories are specified in
sector paragraph III.
(i) Agriculture
(ii) Micro, Small and Medium Enterprises II. Targets /Sub-targets for
(iii) Export Credit
Priority sector
(iv) Education
(i) The targets and sub-targets set under
(v) Housing
priority sector lending for all scheduled
(vi) Social Infrastructure
commercial banks operating in India are
(vii) Renewable Energy
furnished below:
(viii) Others
Categories Domestic scheduled commercial banks and Foreign banks with
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Foreign banks with 20 branches and above lessthan 20 branches
Total Priority 40 percent of Adjusted Net Bank Credit 40 percent of Adjusted
Sector [ANBC defined in sub paragraph (iii)] or NetBank Credit
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Credit Equivalent Amount of Off-Balance [ANBC definedin sub
Sheet Exposure, whichever is higher. paragraph (iii)] orCredit
Foreign banks with 20 branches and above Equivalent Amount
have to achieve the Total Priority Sector ofOff-Balance Sheet
A
Target within a maximum period of five Exposure,whichever is
years starting from April 1, 2013 and ending higher; to beachieved
on March 31, 2018 as per the action plans in a phased mannerby
R
submitted by them and approved by RBI. 2020 as indicated in
subparagraph (ii) below.
Agriculture 18 percent of ANBC or Credit Equivalent Not applicable
Amount of Off-Balance Sheet Exposure,
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whichever is higher. Within the 18 percent
target for agriculture, a target of 8 percent
of ANBC or Credit Equivalent Amount of
Off-Balance Sheet Exposure, whichever is
higher is prescribed for Small and Marginal
Farmers, to be achieved in a phased
manner i.e., 7 per cent by March 2016 and 8
per cent by March 2017.
Foreign banks with 20 branches and above
have to achieve the Agriculture Target within
a maximum period of five years starting
from April 1, 2013 and ending on March 31,
2018 as per the action plans submitted by
them and approved by RBI. The sub-target
for Small and Marginal farmers would be
made applicable post 2018 after a review in
2017.
##
46 Annexure
Micro 7.5 percent of ANBC or Credit Equivalent Not Applicable

Enterprises Amount of Off-Balance Sheet Exposure,
whichever is higher to be achieved in a
phased manner i.e. 7 per cent by March 2016
and 7.5 per cent by March 2017.
The sub-target for Micro Enterprises for
foreign banks with 20 branches and above
would be made applicable post 2018 after a
review in 2017.
Advances 10 percent of ANBC or Credit Equivalent Not Applicable
to Weaker Amount of Off-Balance Sheet Exposure,
Sections whichever is higher.
Foreign banks with 20 branches and above
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have to achieve the Weaker Sections Target
within a maximum period of five years
starting from April 1, 2013 and ending on
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March 31, 2018 as per the action plans
submitted by them and approved by RBI.
## Additionally, domestic banks are directed to ensure that the overall lending to non-corporate farmers does not fall below
the system-wide average of the last three years achievement. All efforts should be maintained to reach the level of 13.5 percent
A
direct lending to the beneficiaries who earlier constituted the direct agriculture sector. The applicable system wide average
figure for computing achievement under priority sector lending will be notified every year. For FY 2015-16, the applicable system
wide average figure is 11.57 percent.
(ii) The Total Priority Sector target of 40 percent for foreign banks with less than 20
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branches has to be achieved in a phased manner as under:-
Financial Year The Total Priority Sector as percentage ofANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever is higher
D
2015-16 32
2016-17 34
2017-18 36
2018-19 38
2019-20 40
The additional priority sector lending ANBC denotes the outstanding Bank
target of 2 percent of ANBC each year from Credit in India [As prescribed in item No.VI
2016-17 to 2019-20 has to be achieved by of Form ‘A’ under Section 42 (2) of the RBI
lending to sectors other than exports. The Act, 1934] minus bills rediscounted with RBI
sub targets for these banks, if to be made and other approved Financial Institutions
applicable post 2020, would be decided in plus permitted non SLR bonds/debentures
due course. under Held to Maturity (HTM) category
(iii) The computation of priority sector plus other investments eligible to be
targets/sub-targets achievement treated as part of priority sector lending
will be based on the ANBC or Credit (e.g. investments in securitised assets).
Equivalent Amount of Off-Balance Sheet The outstanding deposits under RIDF and
Exposures, whichever is higher, as on the other funds with NABARD, NHB, SIDBI and
corresponding date of the preceding year. MUDRA Ltd. in lieu of non-achievement
For the purpose of priority sector lending, of priority sector lending targets/sub-
Annexure 47
targets will form part of ANBC. Advances account of issuance of long-term bonds
extended in India against the incremental for infrastructure and affordable housing
FCNR (B)/NRE deposits, qualifying for as per Reserve Bank’s circular DBOD.BP.BC.
exemption from CRR/SLR requirements, No.25/08.12.014/2014-15 dated July 15, 2014
as per the Reserve Bank’s circulars DBOD. will also be excluded from the ANBC for
No.Ret.BC.36/12.01.001/2013-14 dated computation of priority sector lending
August 14, 2013 read with DBOD.No.Ret.
targets. For the purpose of calculation of
BC.93/12.01.001/2013-14 dated January 31,
Credit Equivalent Amount of Off-Balance
2014 and DBOD mailbox clarification issued
Sheet Exposures, banks may be guided by
on February 6, 2014 will be excluded from
the Master Circular on Exposure Norms
the ANBC for computation of priority
issued by our Department of Banking
sector lending targets, till their repayment.
Regulation.
The eligible amount for exemption on
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Computation of Adjusted Net Bank Credit (ANBC)
Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section I
F
42 (2) of the RBI Act, 1934].
Bills Rediscounted with RBI and other approved Financial Institutions II
Net Bank Credit (NBC)* III (I-II)
Bonds/debentures in Non-SLR categories under HTM category+ other IV
A
investments eligible to be treated as priority sector +Outstanding Deposits
under RIDF and other eligible funds with NABARD, NHB, SIDBI and MUDRA
Ltd. on account of priority sector shortfall + outstanding PSLCs
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Eligible amount for exemptions on issuance of long-term bonds for V
infrastructure and affordable housing as per circular DBOD.BP.BC.
No.25/08.12.014/2014-15 dated July 15, 2014.
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Eligible advances extended in India against the incremental FCNR (B)/NRE VI
deposits, qualifying for exemption from CRR/SLR requirements.
ANBC III+IV-V-VI
* For the purpose of priority sector computation only. Banks should not deduct / net any amount like provisions, accrued
interest, etc. from NBC.
It has been observed that some banks III. Description of the eligible
are subtracting prudential write off
at Corporate/Head Office level while
categories under priority
reporting Bank Credit as above. In such sector
cases it must be ensured that bank credit
to priority sector and all other sub-sectors 1. Agriculture
so written off should also be subtracted
category wise from priority sector and sub- The lending to agriculture sector has been
target achievement. defined to include (i) Farm Credit (which
will include short-term crop loans and
All types of loans, investments or any other
medium/long-term credit to farmers) (ii)
items which are treated as eligible for
Agriculture Infrastructure and (iii) Ancillary
classification under priority sector target/
Activities. A list of eligible activities under
sub-target achievement should also form
the three sub-categories is indicated
part of Adjusted Net Bank Credit.
below:
48 Annexure
1.1. Farm credit A. Loans to individual farmers [including Self Help Groups
(SHGs) orJoint Liability Groups (JLGs), i.e. groups of individual
farmers,provided banks maintain disaggregated data of such
loans], directlyengaged in Agriculture and Allied Activities, viz., dairy,
fishery,animal husbandry, poultry, bee-keeping and sericulture. This
willinclude: (i) Crop loans to farmers, which will include traditional/
non-traditionalplantations and horticulture, and, loans for allied
activities. (ii) Medium and long-term loans to farmers for agriculture
and alliedactivities (e.g. purchase of agricultural implements and
machinery,loans for irrigation and other developmental activities
undertaken inthe farm, and developmental loans for allied activities.)
(iii) Loans to farmers for pre and post-harvest activities, viz.,
spraying,weeding, harvesting, sorting, grading and transporting of
T
their ownfarm produce. (iv) Loans to farmers up to ₹50 lakh against
pledge/hypothecation ofagricultural produce (including warehouse
receipts) for a period notexceeding 12 months. (v) Loans to distressed
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farmers indebted to non-institutional lenders. (vi) Loans to farmers
under the Kisan Credit Card Scheme. (vii) Loans to small and
marginal farmers for purchase of land foragricultural purposes.
B. Loans to corporate farmers, farmers' producer organizations/
A
companies of individual farmers, partnership firms and co-operatives
of farmers directly engaged in Agriculture and Allied Activities, viz.,
dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture
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up to an aggregate limit of ₹2 crore per borrower. This will include:
(i) Crop loans to farmers which will include traditional/non-traditional
plantations and horticulture, and, loans for allied activities.
(ii) Medium and long-term loans to farmers for agriculture and allied
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activities (e.g. purchase of agricultural implements and machinery,
loans for irrigation and other developmental activities undertaken in
the farm, and developmental loans for allied activities.)
(iii) Loans to farmers for pre and post-harvest activities, viz., spraying,
weeding, harvesting, sorting, grading and transporting of their own
farm produce.
(iv) Loans up to ₹50 lakh against pledge/hypothecation of
agricultural produce (including warehouse receipts) for a period not
exceeding 12 months.
1.2. Agriculture i) Loans for construction of storage facilities (warehouses,
infrastructure marketyards, godowns and silos) including cold storage units/ cold
storagechains designed to store agriculture produce/products,
irrespective oftheir location. ii) Soil conservation and watershed
development. iii) Plant tissue culture and agri-biotechnology, seed
production,production of bio-pesticides, bio-fertilizer, and vermi
composting. For the above loans, an aggregate sanctioned limit of
₹100 crore perborrower from the banking system, will apply.
Annexure 49
1.3. Ancillary (i) Loans up to ₹5 crore to co-operative societies of farmers

activities fordisposing of the produce of members. (ii) Loans for setting up
of Agriclinics and Agribusiness Centres. (iii) Loans for Food and
Agro-processing up to an aggregatesanctioned limit of ₹100 crore
per borrower from the banking system. (iv) Loans to Custom Service
Units managed by individuals,institutions or organizations who
maintain a fleet of tractors,bulldozers, well-boring equipment,
threshers, combines, etc., andundertake farm work for farmers on
contract basis. (v) Bank loans to Primary Agricultural Credit Societies
(PACS),Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi-
Purpose Societies (LAMPS) for on-lending to agriculture. (vi) Loans
sanctioned by banks to MFIs for on-lending to agriculturesector
as per the conditions specified in paragraph IX of this circular (vii)
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Outstanding deposits under RIDF and other eligible funds with
NABARD on account of priority sector shortfall.
For the purpose of computation of 7  Loans to farmers' producer
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percent/ 8 percent target, Small and companies of individual farmers,
Marginal Farmers will include the and co-operatives of farmers directly
following:- engaged in Agriculture and Allied
 Farmers with landholding of up to 1 Activities, where the membership of
A
hectare (Marginal Farmers). Farmers Small and Marginal Farmers is not
with a landholding of more than 1 less than 75 per cent by number and
hectare and up to 2 hectares (Small whose land-holding share is also
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Farmers). not less than 75 per cent of the total
 Landless agricultural labourers, tenant land-holding.
farmers, oral lessees and share-
D
croppers, whose share of landholding 2. Micro, Small and Medium
is within the limits prescribed for small Enterprises (MSMEs)
and marginal farmers.
 Loans to Self Help Groups (SHGs) 2.1. The limits for investment in plant and
or Joint Liability Groups (JLGs), machinery/equipment for manufacturing
i.e. groups of individual Small / service enterprise, as notified by Ministry
and Marginal farmers directly of Micro, Small and Medium Enterprises,
engaged in Agriculture and Allied vide S.O.1642(E) dated September 9, 2006
Activities, provided banks maintain are as under:-
disaggregated data of such loans.
Manufacturing Sector
Enterprises Investment in plant and machinery
Micro Enterprises Does not exceed twenty five lakh rupees
Small Enterprises More than twenty five lakh rupees but does notexceed five
crore rupees
Medium Enterprises More than five crore rupees but does not exceedten crore
rupees
Service Sector
Enterprises Investment in equipment
50 Annexure
Micro Enterprises Does not exceed ten lakh rupees

Small Enterprises More than ten lakh rupees but does not exceed twocrore
rupees
Medium Enterprises More than two crore rupees but does not exceedfive crore
rupees
Bank loans to Micro, Small and Medium industries.

Enterprises, for both manufacturing and (iii) Loans sanctioned by banks to MFIs
service sectors are eligible to be classified for on-lending to MSME sector as per
under the priority sector as per the the conditions specified in paragraph
following norms: IX of this circular.
(iv) Credit outstanding under General
2.2. Manufacturing Enterprises
Credit Cards (including Artisan Credit
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The Micro, Small and Medium Enterprises Card, Laghu Udyami Card, Swarojgar
engaged in the manufacture or production Credit Card, and Weaver’s Card etc. in
of goods to any industry specified in existence and catering to the non-
F
the first schedule to the Industries farm entrepreneurial credit needs of
(Development and Regulation) Act, 1951 and individuals).
as notified by the Government from time to (v) Overdrafts extended by banks after
time. The Manufacturing Enterprises are April 8, 2015 upto ₹5,000/- under
A
defined in terms of investment in plant and Pradhan Mantri Jan DhanYojana
machinery. (PMJDY) accounts provided the
borrower’s household annual income
R
2.3. Service Enterprises does not exceed ₹100,000/- for rural
Bank loans up to ₹ 5 crore per unit to areas and ₹1,60,000/- for non-rural
Micro and Small Enterprises and ₹ 10 areas. These overdrafts will qualify as
crore to Medium Enterprises engaged achievement of the target for lending
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in providing or rendering of services to Micro Enterprises.
and defined in terms of investment in (vi) Outstanding deposits with SIDBI and
equipment under MSMED Act, 2006. MUDRA Ltd. on account of priority
sector shortfall.
2.4. Khadi and Village Industries Sector
(KVI) 2.6. Considering that the MSMED Act,
All loans to units in the KVI sector will be 2006 does not provide for any sub-
eligible for classification under the sub- categorization within the definition of
target of 7 percent /7.5 percent prescribed micro enterprises and that the sub-target
for Micro Enterprises under priority sector. for lending to micro enterprises has been
fixed, the current sub-categorization within
2.5. Other Finance to MSMEs the definition of micro enterprises in the
existing guidelines is dispensed with.
(i) Loans to entities involved in assisting
the decentralized sector in the supply
2.7. To ensure that MSMEs do not remain
of inputs to and marketing of outputs
small and medium units merely to remain
of artisans, village and cottage
eligible for priority sector status, the
industries.
MSME units will continue to enjoy the
(ii) Loans to co-operatives of producers priority sector lending status up to three
in the decentralized sector viz. years after they grow out of the MSME
artisans, village and cottage category concerned.
Annexure 51
3. Export Credit
The Export Credit extended as per the details below would be classified as priority
sector.
Domestic banks Foreign banks with 20 branches Foreign banks

and above withless than 20
branches
Incremental export credit Incremental export credit over Export credit will
over corresponding date of corresponding date of the beallowed up
the preceding year, up to 2 preceding year, up to 2 percent to 32percent of
percent of ANBC or Credit of ANBC or Credit Equivalent ANBC orCredit
Equivalent Amount of Off- Amount of Off-Balance Sheet EquivalentAmount
Balance Sheet Exposure, Exposure, whichever is higher, of Off-Balance
T
whichever is higher, effective effective from April 1, 2017 (As per SheetExposure,
from April 1, 2015 subject to a their approved plans, foreign whicheveris higher.
sanctioned limit of up to ₹25 banks with 20 branches and
F
crore per borrower to units above are allowed to count
having turnover of up to ₹100 certain percentage of export
crore. credit limit as priority sector till
March 2017).
A
Export credit includes pre-shipment and ₹35 lakh and ₹25 lakh respectively.
post shipment export credit (excluding off- The housing loans to banks’ own
balance sheet items) as defined in Master employees will be excluded. As
R
Circular on Rupee / Foreign Currency housing loans which are backed by
Export Credit and Customer Service to long term bonds are exempted from
Exporters issued by our Department of ANBC, banks should either include
D
Banking Regulation. such housing loans to individuals up
to ₹28 lakh in metropolitan centres
4. Education and ₹20 lakh in other centres under
priority sector or take benefit of
Loans to individuals for educational
exemption from ANBC, but not both.
purposes including vocational courses
(ii) Loans for repairs to damaged
upto ₹10 lakh irrespective of the sanctioned
dwelling units of families up to ₹5 lakh
amount will be considered as eligible for
in metropolitan centres and up to ₹2
priority sector.
lakh in other centres.
5. Housing (iii) Bank loans to any governmental

agency for construction of dwelling
(i) Loans to individuals up to ₹28 units or for slum clearance and
lakh in metropolitan centres (with rehabilitation of slum dwellers subject
population of ten lakh and above) to a ceiling of ₹10 lakh per dwelling
and loans up to ₹20 lakh in other unit.
centres for purchase/construction
(iv) The loans sanctioned by banks for
of a dwelling unit per family provided
housing projects exclusively for the
the overall cost of the dwelling unit
purpose of construction of houses
in the metropolitan centre and at
for economically weaker sections and
other centres should not exceed
low income groups, the total cost of
52 Annexure
which does not exceed ₹10 lakh per facilities will be eligible for categorization
dwelling unit. For the purpose of as priority sector under ‘Social
identifying the economically weaker Infrastructure’, subject to the criteria laid
sections and low income groups, the down in paragraph IX of this Circular.
family income limit of ₹2 lakh per
annum, irrespective of the location, is 7. Renewable Energy
prescribed.
Bank loans up to a limit of ₹15 crore to
(v) Bank loans to Housing Finance
borrowers for purposes like solar based
Companies (HFCs), approved by
power generators, biomass based power
NHB for their refinance, for on-
generators, wind mills, micro-hydel plants
lending for the purpose of purchase/
and for non-conventional energy based
construction/reconstruction of
public utilities viz. street lighting systems,
individual dwelling units or for slum
and remote village electrification. For
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clearance and rehabilitation of slum
individual households, the loan limit will be
dwellers, subject to an aggregate loan
₹10 lakh per borrower.
limit of ₹10 lakh per borrower.
F
The eligibility under priority sector
8. Others
loans to HFCs is restricted to five
percent of the individual bank’s 8.1. Loans not exceeding ₹50,000/- per
total priority sector lending, on an borrower provided directly by banks to
A
ongoing basis. The maturity of bank individuals and their SHG/JLG, provided
loans should be co-terminus with the individual borrower’s household
average maturity of loans extended annual income in rural areas does not
R
by HFCs. Banks should maintain exceed ₹100,000/- and for non-rural areas it
necessary borrower-wise details of does not exceed ₹1,60,000/-.
the underlying portfolio.
(vi) Outstanding deposits with NHB on 8.2. Loans to distressed persons [other
D
account of priority sector shortfall. than farmers included under III (1.1) A (v)]
not exceeding ₹100,000/- per borrower to
prepay their debt to non-institutional
6. Social infrastructure
lenders.
6.1. Bank loans up to a limit of ₹5 crore per
borrower for building social infrastructure 8.3. Loans sanctioned to State Sponsored
for activities namely schools, health care Organisations for Scheduled Castes/
facilities, drinking water facilities and Scheduled Tribes for the specific purpose
sanitation facilities including construction/ of purchase and supply of inputs and/
refurbishment of household toilets and or the marketing of the outputs of the
household level water improvements in Tier beneficiaries of these organisations.
II to Tier VI centres.
6.2. Bank credit to Micro Finance

IV. Weaker Sections
Institutions (MFIs) extended for on-lending Priority sector loans to the following
to individuals and also to members of borrowers will be considered under Weaker
SHGs/JLGs for water and sanitation Sections category:-
Annexure 53
No. Category
1. Small and Marginal Farmers
2. Artisans, village and cottage industries where individual credit limits do
notexceed ₹1 lakh
3. Beneficiaries under Government Sponsored Schemes such as National
RuralLivelihoods Mission (NRLM), National Urban Livelihood Mission (NULM)and
Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS)
4. Scheduled Castes and Scheduled Tribes
5. Beneficiaries of Differential Rate of Interest (DRI) scheme
6. Self Help Groups
7. Distressed farmers indebted to non-institutional lenders
8. Distressed persons other than farmers, with loan amount not exceeding₹1
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lakhper borrower to prepay their debt to non-institutional lenders
9. Individual women beneficiaries up to ₹1 lakh per borrower
10. Persons with disabilities
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11. Overdrafts upto ₹5,000/- under Pradhan Mantri Jan-DhanYojana (PMJDY)
accounts, provided the borrower’s household annual income does not
exceed₹100,000/- for rural areas and ₹1,60,000/- for non-rural areas
12. Minority communities as may be notified by Government of India from time
A
totime.
In States, where one of the minority (b) the all inclusive interest charged
R
communities notified is, in fact, in majority, to the ultimate borrower by the
item (12) will cover only the other notified originating entity should not
minorities. These States/ Union Territories exceed the Base Rate of the
are Jammu & Kashmir, Punjab, Meghalaya, investing bank plus 8 percent
D
Mizoram, Nagaland and Lakshadweep. per annum.
The investments in securitised assets
V. Investments by banks in originated by MFIs, which comply
with the guidelines in Paragraph IX of
securitised assets
this circular are exempted from this
(i) Investments by banks in securitised interest cap as there are separate
assets, representing loans to various caps on margin and interest rate.
categories of priority sector, except
(ii) Investments made by banks in
'others' category, are eligible for
securitised assets originated by
classification under respective
NBFCs, where the underlying assets
categories of priority sector
are loans against gold jewellery, are
depending on the underlying assets
not eligible for priority sector status.
provided:
(a) the securitised assets are
originated by banks and VI. Transfer of Assets through
financial institutions and are Direct Assignment /Outright
eligible to be classified as
purchases
priority sector advances prior
to securitisation and fulfil the (i) Assignments/Outright purchases of
Reserve Bank of India guidelines pool of assets by banks representing
on securitisation. loans under various categories
54 Annexure
of priority sector, except the VII. Inter Bank Participation

'others' category, will be eligible
for classification under respective
Certificates
categories of priority sector provided: Inter Bank Participation Certificates
(IBPCs) bought by banks, on a risk sharing
(a) the assets are originated by
basis, are eligible for classification under
banks and financial institutions
respective categories of priority sector,
which are eligible to be classified
provided the underlying assets are eligible
as priority sector advances prior
to be categorized under the respective
to the purchase and fulfil the
categories of priority sector and the banks
Reserve Bank of India guidelines
fulfil the Reserve Bank of India guidelines
on outright purchase/
on IBPCs.
assignment.
(b) the eligible loan assets so
VIII. Priority Sector Lending
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purchased should not be
disposed of other than by way of Certificates
repayment.
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The outstanding priority sector lending
(c) the all inclusive interest charged certificates (after the guidelines are issued
to the ultimate borrower by the in this regard by the Reserve Bank of India)
originating entity should not bought by the banks will be eligible for
classification under respective categories
A
exceed the Base Rate of the
purchasing bank plus 8 percent of priority sector provided the assets are
per annum. originated by banks, and are eligible to be
classified as priority sector advances and
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The Assignments/Outright purchases
fulfil the Reserve Bank of India guidelines
of eligible priority sector loans
on priority sector lending certificates.
from MFIs, which comply with the
guidelines in Paragraph IX of this
D
circular are exempted from this
IX. Bank loans to MFIs for on-
interest rate cap as there are lending
separate caps on margin and interest (a) Bank credit to MFIs extended for
rate. on-lending to individuals and also
(ii) When the banks undertake outright to members of SHGs / JLGs will be
purchase of loan assets from banks/ eligible for categorisation as priority
financial institutions to be classified sector advance under respective
under priority sector, they must categories viz., Agriculture, Micro,
report the nominal amount actually Small and Medium Enterprises,
disbursed to end priority sector Social Infrastructure [mentioned
borrowers and not the premium in paragraph III(6.2)] and Others,
embedded amount paid to the sellers. provided not less than 85 percent of
total assets of MFI (other than cash,
(iii) Purchase/ assignment/investment
balances with banks and financial
transactions undertaken by banks
institutions, government securities
with NBFCs, where the underlying
and money market instruments) are
assets are loans against gold in the nature of “qualifying assets”.
jewellery, are not eligible for priority In addition, aggregate amount of
sector status. loan, extended for income generating
Annexure 55
activity, should be not less than 50 fortnightly balances of

percent of the total loans given by outstanding loan portfolio of
MFIs. qualifying assets.
(b) A “qualifying asset” shall mean a loan (ii) Interest cap on individual loans:
disbursed by MFI, which satisfies the With effect from April 1, 2014,
following criteria: interest rate on individual loans
(i) The loan is to be extended to will be the average Base Rate of
a borrower whose household five largest commercial banks
annual income in rural areas by assets multiplied by 2.75 per
does not exceed ₹1,00,000/- while annum or cost of funds plus
for non-rural areas it should not margin cap, whichever is less.
exceed ₹1,60,000/-. The average of the Base Rate
shall be advised by Reserve
(ii) Loan does not exceed ₹60,000/-
T
Bank of India.
in the first cycle and ₹100,000/- in
the subsequent cycles. (iii) Only three components are to
be included in pricing of loans
F
(iii) Total indebtedness of the
viz., (a) a processing fee not
borrower does not exceed
exceeding 1 percent of the gross
₹1,00,000/-.
loan amount, (b) the interest
(iv) Tenure of loan is not less than
charge and (c) the insurance
A
24 months when loan amount
premium.
exceeds ₹15,000/- with right to
(iv) The processing fee is not to be
borrower of prepayment without
R
penalty. included in the margin cap or
the interest cap.
(v) The loan is without collateral.
(v) Only the actual cost of
(vi) Loan is repayable by weekly,
insurance i.e. actual cost of
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fortnightly or monthly
group insurance for life, health
installments at the choice of the
and livestock for borrower
borrower.
and spouse can be recovered;
(c) Further, the banks have to ensure administrative charges may
that MFIs comply with the following be recovered as per IRDA
caps on margin and interest rate guidelines.
as also other ‘pricing guidelines’, to
(vi) There should not be any penalty
be eligible to classify these loans as
for delayed payment.
priority sector loans.
(vii) No Security Deposit/ Margin is
(i) Margin cap: The margin cap
to be taken.
should not exceed 10 percent
for MFIs having loan portfolio (d) The banks should obtain from MFI, at
exceeding ₹100 crore and 12 the end of each quarter, a Chartered
percent for others. The interest Accountant’s Certificate stating, inter-
cost is to be calculated on alia, that the criteria on (i) qualifying
average fortnightly balances assets, (ii) the aggregate amount of
of outstanding borrowings loan, extended for income generation
and interest income is to activity, and (iii) pricing guidelines are
be calculated on average followed.
56 Annexure
X. Monitoring of Priority Sector Supervision would be adjusted/ reduced

from the achievement of that year, to
Lending targets which the amount of declassification/
To ensure continuous flow of credit to misclassification pertains, for allocation to
priority sector, the compliance of banks various funds in subsequent years.
will be monitored on ‘quarterly’ basis. The Non-achievement of priority sector targets
data on priority sector advances has to and sub-targets will be taken into account
be furnished by banks at quarterly and while granting regulatory clearances/
annual intervals as per revised reporting approvals for various purposes.
formats.
XII. Common guidelines for

XI. Non-achievement of
priority sector loans
Priority Sector targets
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Banks should comply with the following
Scheduled Commercial Banks having any common guidelines for all categories of
shortfall in lending to priority sector shall advances under the priority sector.
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be allocated amounts for contribution
to the Rural Infrastructure Development
1. Rate of interest
Fund (RIDF) established with NABARD and
other Funds with NABARD/NHB/SIDBI/ The rates of interest on bank loans will be
MUDRA Ltd. , as decided by the Reserve as per directives issued by our Department
A
Bank from time to time. For the year of Banking Regulation from time to time.
2015-16, the shortfall in achieving priority
sector target/sub-targets will be assessed 2. Service charges
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based on the position as on March 31,
No loan related and adhoc service
2016. From financial year 2016-17 onwards,
charges/inspection charges should be
the achievement will be arrived at the end
levied on priority sector loans up to
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of financial year based on the average
₹25,000. In the case of eligible priority
of priority sector target /sub-target
sector loans to SHGs/ JLGs, this limit will
achievement as at the end of each quarter.
be applicable per member and not to the
While computing priority sector target group as a whole.
achievement from financial year 2016-17
onwards, shortfall / excess lending for 3. Receipt, Sanction/Rejection/
each quarter will be monitored separately.
Disbursement Register
A simple average of all quarters will be
arrived at and considered for computation A register/ electronic record should be
of overall shortfall / excess at the end of maintained by the bank, wherein the
the year. The same method will be followed date of receipt, sanction/rejection/
for calculating the achievement of priority disbursement with reasons thereof, etc.,
sector sub-targets. (Illustrative example should be recorded. The register/electronic
given in Annex A) record should be made available to all
inspecting agencies.
The interest rates on banks’ contribution
to RIDF or any other Funds, tenure of
deposits, etc. shall be fixed by Reserve 4. Issue of Acknowledgement of
Bank of India from time to time. Loan Applications
The misclassifications reported by the Banks should provide acknowledgement
Reserve Bank’s Department of Banking for loan applications received under
Annexure 57
priority sector loans. Bank Boards should for eligible priority sector activities,
prescribe a time limit within which the along with priority sector loans
bank communicates its decision in writing for the purpose of computation of
to the applicants. priority sector target achievement. In
that case, the credit equivalent of all
XIII. Amendments off-balance sheet items (both priority
sector and non-priority sector
These guidelines are subject to any further
excluding interbank) should be added
instructions that may be issued by the RBI
to the ANBC in the denominator
from time to time.
for computation of Priority Sector
Lending targets.
XIV. Definitions/Clarifications 3. Off-balance sheet interbank
1. On-lending: Loans sanctioned by exposures are excluded for
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banks to eligible intermediaries for computing Credit Equivalent of Off
onward lending only for creation of -Balance Sheet Exposures for the
priority sector assets. The average priority sector targets.
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maturity of priority sector assets
4. The term “all inclusive interest”
thus created should be broadly co-
includes interest (effective annual
terminus with maturity of the bank
interest), processing fees and service
loan.
charges.
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2. Contingent liabilities/off-balance
5. Banks should ensure that loans
sheet items do not form part of
extended under priority sector are for
priority sector target achievement.
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approved purposes and the end use
However, foreign banks with less than
is continuously monitored. The banks
20 branches have an option to reckon
should put in place proper internal
the credit equivalent of off-balance
controls and systems in this regard.
sheet items, extended to borrowers
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58 Annexure
Appendix
List of Circulars consolidated by the Master Circular
S. Circular No. Date Subject Paragraph
No. No.
1. DBOD Mailbox November 27, Bank loans to SHGs/ JLGs- XII (2)
clarification 2015 Processing Charges
2. FIDD.CO.Plan. November 18, Priority Sector Lending-Targets II (i)
BC.13/04.09.01/2015-16 2015 and Classification
3. DBOD Mailbox November 3, Overdrafts upto ₹5000/- under 2.5 (v),IV(11)
clarification 2015 PMJDY accounts
4. DBOD Mailbox September 7, Calculation of shortfall/ excess XI
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clarification 2015
5. DBOD Mailbox August 14, Social Infrastructure and Bank 6, IX
clarification 2015 loans to MFIs for on-lending -
F
Social Infrastructure
6. FIDD.CO.Plan. July 16, 2015 Priority Sector Lending –Targets II (i)
BC.08/04.09.01/2015-16 and Classification
7. DBOD Mailbox June 26, 2015 Outstanding deposits with II (iii) 2.5 (vi)
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clarification MUDRA Ltd. on account of
priority sector shortfall
8. DBOD Mailbox June 12, 2015 Loans to Minority Communities IV(12)
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clarification
9. DBOD Mailbox June 11, 2015 Loans to Custom Service Units III(1)(1.3)
clarification
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10. FIDD.CO.Plan.BC. April 23, 2015 Priority Sector Lending-Targets
54/04.09.01/2014-15 and Classification
Annexure 59
Annex A
Priority Sector Target Achievement- Calculation of shortfall / excess
Illustrative example:
Tables No.1 and 2 below illustrate the method followed for computation of shortfall /
excess in priority sector target achievement at the end of the financial year under the
revised PSL guidelines.
Table-1
Amount in ₹ thousands
Quarter ended PSL targets Priority Sector Shortfall / Excess
Amount
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Outstanding
June 3296156032 3169380800 -126775232
F
September 3088265369 3119459969 31194600
December 3176948703 3192913269 15964566
March 3245609908 3213475156 -32134752
Total 12806980012 12695229194 -111750818
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Average 3201745003 3173807299 -27937704
Table-2
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Amount in ₹ thousands
Quarter ended PSL targets Priority Sector Shortfall / Excess
Amount
Outstanding
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June 3296156032 3279675252 -16480780
September 3088265369 3123780421 35515052
December 3176948703 3272257164 95308461
March 3245609908 3213153809 -32456099
Total 12806980012 12888866646 81886634
Average 3201745003 3222216661 20471658
In the example given in Table - 1, the bank has overall shortfall of ₹ 27937704 thousand
at the end of the financial year. In Table – 2, the bank has overall excess of ₹ 20471658
thousand at the end of the financial year.
The same method will be followed for calculating the achievement of quarterly and
yearly priority sector sub-targets.
Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year.
60 Annexure
Annexure B
RBI/2017-18/10 FIDD.GSSD.CO.BC. July 1, 2015

No.04/09.01.01/2017-18
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The Chairman/ Managing Director & CEO
All Scheduled Commercial Banks
Dear Sir/ Madam,
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Master Circular – Deendayal Antyodaya Yojana - National Rural Livelihoods
Mission (DAY-NRLM)
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Please refer to the Master Circular FIDD.GSSD.CO.BC.No.07/09.01.01/2016-17 dated July 01,
2016 consolidating guidelines / instructions / directions issued to banks with regards to
Deendayal Antyodaya Yojana - National Rural Livelihoods Mission. The Master Circular
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has been suitably updated by incorporating the instructions on DAY-NRLM issued up to
June 30, 2017, which are listed in the Appendix and also been placed on website (https://
www.rbi.org.in).
A copy of Master Circular is enclosed.
Yours faithfully.
(Ajay Kumar Misra) Chief General Manager
Encls: As above
Annexure 61
Master Circular
Deendayal Antyodaya Yojana environment for the poor to access their
rights and entitlements and public service.
- National Rural Livelihoods
Mission (DAY-NRLM) 1.3 A women’s self-help group, coming
together on the basis of mutual affinity
1. Background is the primary building block of the DAY-
NRLM community institutional design.
1.1 The Ministry of Rural Development, DAY-NRLM focuses on building, nurturing
Government of India launched a and strengthening the institutions of the
new programme known as National poor women, including the SHGs and
Rural Livelihoods Mission (NRLM) their Federations at village and higher
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by restructuring and replacing the levels. In addition, DAY-NRLM promotes
Swarnjayanti Gram Swarozgar Yojana livelihood institutions of rural poor. The
(SGSY) scheme with effect from April 01, mission provides a continuous hand-
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2013. Detailed ‘Guidelines’ were circulated holding support to the institutions of poor
to all Scheduled Commercial Banks for a period of 5-7 years till they come
including Regional Rural Banks vide RBI out of abject poverty. The community
circular RPCD.GSSD.CO.No.81/09.01.03/2012-13 institutional architecture put in place
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dated June 27, 2013. under DAY- NRLM will provide support for
a much longer duration and of a greater
1.2 NRLM was renamed as DAY-NRLM intensity.
(Deendayal Antyodaya Yojana - National
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Rural Livelihoods Mission) w.e.f. March 29, 1.4 The support from DAY-NRLM includes
2016 and is the flagship program of Govt. all round capacity building of the SHGs
of India for promoting poverty reduction ensuring that the group functions
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through building strong institutions effectively on all issues concerning
of the poor, particularly women, and their members, financial management,
enabling these institutions to access a providing them with initial fund support
range of financial services and livelihoods to address vulnerabilities and high cost
services. DAY-NRLM is designed to be a indebtedness, formation and nurturing of
highly intensive program and focuses SHG federations, making the federations
on intensive application of human and evolve as strong support organizations,
material resources in order to mobilize the making livelihoods of the poor sustainable,
poor into functionally effective community formation and nurturing of livelihoods
owned institutions, promote their financial organizations, skill development of the
inclusion and strengthen their livelihoods. rural youth to start their own enterprises
DAY-NRLM complements these institutional or take up jobs in organized sector,
platforms of the poor with services that enabling these institutions to access
include financial and capital services, their entitlements from the key line
production and productivity enhancement departments, etc.
services, technology, knowledge, skills and
inputs, market linkage, etc. The community 1.5 The implementation of DAY-NRLM
institutions also offer a platform for has been in a Mission Mode since April,
convergence and partnerships with 2013. DAY-NRLM adopts a demand
various stakeholders by building driven approach, enabling the States
62 Annexure
to formulate their own State specific 2.4 SHG is an informal group and
poverty reduction action plans. DAY- registration under any Societies Act, State
NRLM enables the State rural livelihoods cooperative Act or a partnership firm is
missions to professionalize their human not mandatory vide Circular RPCD.No. Plan
resources at State, district and block level. BC.13/PL-09.22/90-91 dated July 24th, 1991.
The State missions are capacitated to However, Federations of Self Help Groups
deliver a wide range of quality services formed at village, Gram Panchayat, Cluster
to the rural poor. DAY-NRLM emphasizes or higher level may be registered under
continuous capacity building, imparting appropriate acts prevailing in their States.
requisite skills and creating linkages with
livelihoods opportunities for the poor, Financial Assistance to the SHGs
including those emerging in the organized
sector, and monitoring against targets of 3. Revolving Fund (RF): DAY-NRLM would
poverty reduction outcomes. The blocks provide Revolving Fund (RF) support to
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and districts in which all the components SHGs in existence for a minimum period
of DAY-NRLM will be implemented, either of 3/6 months and follow the norms of
good SHGs, i.e. they follow ‘Panchasutra’ –
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through the SRLMs or partner institutions
or NGOs, will be the intensive blocks regular meetings, regular savings, regular
and districts, whereas remaining will be internal lending, regular recoveries and
non-intensive blocks and districts. The maintenance of proper books of accounts.
selections of intensive districts are done Only such SHGs that have not received
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by the states based on the demographic any RF earlier will be provided with RF, as
vulnerabilities. It will be rolled out in a corpus, with a minimum of ₹10,000 and
phased manner over the next 7-8 years. All up to a maximum of ₹15,000 per SHG.
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blocks in the country will become intensive The purpose of RF is to strengthen their
blocks over time. The key features of DAY- institutional and financial management
NRLM have been furnished in Annex I. capacity and build a good credit history
within the group.
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2. Women SHGs and their
4. Capital Subsidy has been discontinued
Federations
under DAY-NRLM:
2.1 Women SHGs under DAY-NRLM consist No Capital Subsidy will be sanctioned to
of 10-20 persons. In case of special SHGs any SHG from the date of implementation
i.e. groups in the difficult areas, groups of DAY-NRLM.
with disabled persons, and groups formed
in remote tribal areas, this number may be 5. Community Investment support
a minimum of 5 persons. Fund (CIF)
2.2 DAY-NRLM promotes affinity based CIF will be provided to the SHGs in the
women Self –help groups. intensive blocks, routed through the
Village level/ Cluster level Federations,
2.3 Only for groups to be formed with to be maintained in perpetuity by the
Persons with disabilities, and other special Federations. The CIF will be used, by the
categories like elders, transgenders, DAY- Federations, to advance loans to the
NRLM will have both men and women in SHGs and/or to undertake the common/
the self-help groups. collective socio-economic activities.
Annexure 63
6. Introduction of Interest and the Federations of the SHGs. The

subvention: ‘Know Your Customer’ (KYC) norms
regarding SHGs as specified from time
DAY-NRLM has a provision for interest to time by Reserve Bank of India will be
subvention, to cover the difference applicable. Banks are advised to maintain
between the Lending Rate of the banks separate Savings and loan account for
and 7%, on all credit from the banks/ Self Help Groups
financial institutions availed by women
7.1.2 Opening of Savings account of
SHGs, for a maximum of ₹ 3,00,000 per SHG.
Federation of SHGs: Banks are advised to
This will be available across the country in
open savings account of Federations of
two ways:
SHGs at village, Gram Panchayat, Cluster
(i) In 250 identified districts, banks will
or higher level. These accounts may
lend to the women SHGs @7% up
be categorized as savings account for
to an aggregated loan amount of
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‘Association of persons’. The ‘Know Your
₹ 3,00,000/-. The SHGs will also get
Customer’ (KYC) norms for the signatories
additional interest subvention of 3%
of such accounts as specified from time
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on prompt payment, reducing the
to time by Reserve Bank of India will be
effective rate of interest to 4%.
applicable.
(ii) In the remaining districts also, all
7.1.3 Transaction in Savings account of
women SHGs under DAY-NRLM are
SHGs and Federation of SHGs: SHGs and
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eligible for interest subvention to
their federations may be encouraged
the extent of difference between the
to transact through their respective
lending rates and 7% for the loan
saving account on regular basis. To
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up to ₹ 3,00,000, subjected to the
facilitate this, banks are advised to
norms prescribed by the respective
enable transactions in jointly operated
SRLMs. This part of the scheme will be
savings account of SHGs and their
operationalized by SRLMs.
federations at retail outlets managed by
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(A separate circular on August 25, 2016 Business Correspondent Agents. Banks
was issued to all Public and Private are also advised to extend all such
Sector Banks containing the detailed services to SHGs and their federations
guidelines on interest subvention and its through Business Correspondent agents
operationalization across the country permitted vide circular DBOD.No.BAPD.
for the year 2016-17 along with the list of BC.122./22.01.009/2013-14 dated June 24,
250 identified districts. Salient features 2014.
and the implementation procedure of the
Scheme are enclosed in Annex II. Interest 7.2 Lending Norms:
subvention for subsequent years will be
7.2.1 The eligibility criteria for the SHGs to
communicated separately to the banks by
avail loans:
GOI/RBI).
 SHG should be in active existence at
least since the last 6 months as per
7. Role of banks
the books of account of SHGs and
7.1 Opening of Savings accounts not from the date of opening of S/B
account.
7.1.1 Opening of Savings account of SHGs:
The role of banks would commence with  SHG should be practicing
opening of accounts for all the Women ‘Panchasutras’ i.e. Regular meetings;
SHGs including members with disability Regular savings; Regular inter-
64 Annexure
loaning; Timely repayment; and Up- prepared by SHG and appraised by

to-date books of accounts; the Federations /Support agency and
 Qualified as per grading norms the previous credit History.
fixed by NABARD. As and when the  DP for Fourth Year onwards: Minimum
federations of the SHGs come to of ₹5 lakhs based on the Micro credit
existence, the grading exercise can plan prepared by SHG and appraised
be done by the Federations to by the Federations /Support agency
support the Banks. and the previous credit History.
 The existing defunct SHGs are also Term Loan: In case of Term Loan, banks are
eligible for credit if they are revived advised to sanction loan amount in doses
and continue to be active for a as mentioned below:
minimum period of 3 months.  First Dose: 6 times of the existing
7.2.2 Loan amount: Emphasis is laid on corpus or minimum of ₹1 lakh
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the multiple doses of assistance under whichever is higher.
DAY-NRLM. This would mean assisting an  Second Dose: 8 times of the existing
SHG over a period of time, through repeat
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corpus or minimum of ₹2 lakh,
doses of credit, to enable them to access whichever is higher
higher amounts of credit for taking up
 Third Dose: Minimum of ₹3 lakhs
sustainable livelihoods and improve on the
based on the Micro credit plan
quality of life.
A
prepared by the SHGs and appraised
SHGs can avail either Term Loan (TL) or a by the Federations /Support agency
Cash Credit Limit (CCL) loan or both based and the previous credit History
on the need. In case of need, additional
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 Fourth Dose: Minimum of ₹5 lakhs
loan can be sanctioned even though the
based on the Micro credit plan
previous loan is outstanding.
prepared by the SHGs and appraised
The amount of credit under different by the Federations /Support agency
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facilities should be as follows: and the previous credit History
Cash Credit Limit (CCL): In case of CCL, Banks should take necessary measures
banks are advised to sanction minimum to ensure that eligible SHG are provided
loan of ₹5 lakhs to each eligible SHGs with repeat loans. Banks are advised to
for a period of 5 years with a yearly work with DAY-NRLM to institutionalize
drawing power (DP). The drawing power a mechanism for online submission of
may be enhanced annually based on loan application of SHGs for tracking and
the repayment performance of the SHG. timely disposal of application.
The drawing power may be calculated as
(Corpus is inclusive of revolving funds, if
follows:
any, received by that SHG, its own savings,
 DP for First Year: 6 times of the interest earning by SHG from on-lending to
existing corpus or minimum of ₹1 lakh its members, income from other sources,
whichever is higher. and funds from other sources in case of
 DP for Second Year: 8 times of promotion by other institutes/NGOs.)
the corpus at the time review/
enhancement or minimum of ₹2 lakh, 7.3 Purpose of loan and repayment:
whichever is higher 7.3.1 The loan amount will be distributed
 DP for Third Year: Minimum of ₹3 among members based on the Micro
lakhs based on the Micro credit plan Credit Plan prepared by the SHGs. The
Annexure 65
loans may be used by members for defaulters of the group should not get
meeting social needs, high cost debt benefits under the DAY-NRLM Scheme
swapping, construction or repair of house, and the group may be financed excluding
construction of toilets and taking up such defaulters while documenting the
sustainable livelihoods by the individual loan. However, banks should not deny loan
members within the SHGs or to finance to entire SHG on the pretext that spouse
any viable common activity started by the or other family members of individual
SHGs. members of SHG being a defaulter with the
7.3.2 Repayment schedule could be as bank. Further, non-willful defaulters should
follows: not be debarred from receiving the loan.
In case default is due to genuine reasons,
 The First year/ first dose of loan will
Banks may follow the norms suggested
be repaid in 6-12 months in monthly/
for restructuring the account with revised
quarterly instalments
repayment schedule.
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 The Second year/ Second dose of
loan will be repaid in 12-24 months in
8. Credit Target Planning
monthly/ quarterly instalments
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 The Third year/ Third dose of loan will 8.1 Based on the Potential Linked Plan/
be repaid in 24-36 months in monthly/ State Focus Paper prepared by NABARD,
quarterly instalments SLBC sub-committee may arrive at the
district-wise, block-wise and branch-wise
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 The loan from Fourth year/ Fourth
dose onwards has to be repaid credit plan. The sub- committee has to
between 3-6 years based on the consider the existing SHGs, New SHGs
proposed, and number of SHGs eligible
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cash flow in monthly/ quarterly
installments. for fresh and repeat loans as suggested
by the SRLMs to arrive at the credit
7.4. Security and Margin targets for the states. The targets so
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decided should be approved in the SLBC
No collateral and no margin will be
and should be reviewed and monitored
charged up to Rs. 10.00 lakhs limit to the
periodically for effective implementation.
SHGs. No lien should be marked against
savings bank account of SHGs and no
8.2. The district-wise credit plans should
deposits should be insisted upon while
be communicated to the DCC. The
sanctioning loans.
Block-wise/Cluster-wise targets are to
be communicated to the bank Branches
7.5. Dealing with Defaulters
through the Controllers.
7.5.1 It is desirable that willful defaulters
should not be financed under DAY-NRLM. 9. Post credit follow-up
In case willful defaulters are members of
a group, they might be allowed to benefit 9.1 Loan pass books in regional
from the thrift and credit activities of the languages may be issued to the SHGs
group including the corpus built up with which may contain all the details of the
the assistance of Revolving Fund. But at loans disbursed to them and the terms
the stage of accessing bank loan by SHG and conditions applicable to the loan
for financing economic activities by its sanctioned. The passbook should be
members, the willful defaulters should not updated with every transaction made by
have the benefit of such bank loan until the SHGs. At the time of documentation
the outstanding loans are repaid. Willful and disbursement of loan, it is advisable to
66 Annexure
clearly explain the terms and conditions as implementation of the guidelines to the
part of financial literacy. scheme, collect data from the branches
and make available consolidated data to
9.2 Bank branches may observe one fixed the Head office and the DAY-NRLM units
day in a fortnight to enable the staff to at the districts/ blocks. The cell should
go to the field and attend the meetings of also discuss this consolidated data in the
the SHGs and Federations to observe the SLBC, BLBC and DCC meetings regularly to
operations of the SHGs and keep a track maintain the effective communication with
of the regularity in the SHGs meetings and the state staff and all banks.
performance.
12.1 State Level Bankers Committee
10. Repayment SLBCs shall constitute a sub-committee
on SHG-bank linkage. The sub-committee
Prompt repayment of the loans is
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should consist of members from all banks
necessary to ensure the success of
operating in the State, RBI, NABARD, CEO
the programme. Banks shall take all
of SRLM, representatives of State Rural
possible measures, i.e. personal contact,
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Development Department, Secretary-
organization of joint recovery camps
Institutional Finance and Representatives
with District Mission Management Units
of Development Departments etc. The
(DPMUs) / DRDAs to ensure the recovery
sub- committee shall meet once in a
of loans. Keeping in view, the importance
A
month with a specific agenda of review,
of loan recovery, banks should prepare a
implementation and monitoring of
list of defaulting SHGs under DAY-NRLM
the SHG-Bank linkage and the issues/
every month and furnish the list in the
constraints in achievement of the credit
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BLBC, DLCC meetings. This would ensure
target. The decisions of SLBCs should be
that DAY-NRLM staff at the district/ block
derived from the analysis of the reports of
level will assist the bankers in initiating the
the sub-committee.
repayment.
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12.2 District Coordination Committee
11. Deputation of the bank officials The DCC (DAY-NRLM sub-committee) shall
to SRLMs regularly monitor the flow of credit to SHGs
As a measure of strengthening the (DPMUs) at the district level and resolve issues that
/ DRDAs and for promoting a better constrain the flow of credit to the SHGs
credit environment, deputation of the at district level. This committee meeting
bank officials to DPMUs/ DRDAs has been should have participation of LDMs, AGM of
NABARD, district coordinators of the banks
suggested. Banks may consider deputing
and DPMU staff representing DAY-NRLM
officers at various levels to the State
and office bearers of SHG federations.
Governments/DRDAs in consultation with
them.
12.3 Block level Bankers Committee
12. Supervision and monitoring of The BLBC shall meet regularly and
take up issues of SHG bank linkage at
the Scheme
the block level. In this Committee, the
Banks may set up DAY-NRLM cells at SHGs/ Federations of the SHGs should
Regional/Zonal offices. These cells be included as members to raise their
should periodically monitor and review voice in the forum. Branch wise status
the flow of credit to the SHGs, ensure the of SHG credit shall be monitored at the
Annexure 67
BLBC (Annex B and C may be used for the conditions for both the banks and the
purpose) poor for a mutually rewarding relationship.
12.4 Reporting to Lead District Managers 14.2 SRLM will assist the SHGs through
The branches may furnish the progress imparting financial literacy, extending
report and the delinquency report under counselling services on savings, credit and
various activities of DAY-NRLM in the training on Micro-investment Planning
format at Annex ‘IV’ and ‘Annex V’ to the embedded in capacity building.
LDM every month for onward submission
to Special Steering Committee/sub-
14.3 SRLMs will extend support to banks
for improving quality of banking services
committee constituted by SLBC.
to poor clients including follow-up for
12.5 Reporting to RBI recovery of over dues if any, by utilising
the services of customer relationship
T
Banks may give a state-wise consolidated
managers (i.e Bank Mitra/ Sakhi) with every
report on the progress made on DAY-NRLM
bank branch involved in financing of SHGs.
to RBI/NABARD at quarterly intervals.
F
Banks are advised to extend necessary
cooperation to Bank Mitra/Sakhi for
12.6 LBR returns
performing their roles.
Existing procedure of submitting LBR
returns to be continued duly furnishing the 14.4 Leveraging IT mobile technologies
A
correct code. and institutions of poor, youth or SHG
member as business facilitators and
13. Data Sharing business correspondents.
R
Data sharing on a mutually agreed format
14.5. Community Based Repayment
/ interval may be provided to DAY-NRLM
mechanism (CBRM)
or State Rural Livelihood Missions (SRLMs)
D
for initiating various strategies including One exclusive sub - committee for SHG
recovery etc. The financing banks are Bank Linkage may be formed at village/
advised to regularly share data on loans to cluster/ block level which will provide
SHGs with the DAY-NRLM or SRLMs, directly support to the banks in ensuring proper
from the CBS platform. utilization of loan amount, recovery
etc. The bank linkage sub - committee
members from each village level federation
14. DAY-NRLM support to the
along with project staff will meet once in
bankers a month under the chairmanship of the
Branch Manager in the branch premises
14.1 SRLM would develop strategic
with the agenda items relating to bank
partnerships with major banks at various
linkage.
levels. It would invest in creating enabling
68 Annexure
Annex I
Key Features of DAY-NRLM the states like AP, Kerala, Tamil Nadu and
Odisha.
1. Universal Social Mobilization The households identified as poor through

the P.I.P process will be accepted as DAY-
To begin with, DAY-NRLM would ensure that
NRLM target group and will be eligible for
at least one member from each identified
all the benefits under the programme. The
rural poor household, preferably a woman,
list finalized after PIP process will be vetted
is brought under the Self Help Group
by the Gram Sabha and approved by the
(SHG) network in a time bound manner.
Gram Panchayat.
Subsequently, both women and men would
be organized for addressing livelihoods Till the PIP process is undertaken by the
T
issues i.e. farmers organizations, milk State in a particular district/Block, the
producers’ cooperatives, weavers rural households already included in the
associations, etc. All these institutions are official BPL list will be targeted under
F
inclusive and no poor would be left out of DAY-NRLM. As already provided in the
them. DAY-NRLM would ensure adequate Framework for implementation of DAY-
coverage of vulnerable sections of the NRLM, up to 30% of the total membership
society such that 50% of the beneficiaries of the SHGs may be from among the
A
are SC/STs, 15% are minorities and 3% are population marginally above the poverty
persons with disability, while keeping in line, subject to the approval of the BPL
view the ultimate target of 100% coverage members of the group. This 30% also
R
of BPL families. includes the excluded poor, those who are
really as poor as those included in BPL list
but their name does not figure in the list.
2. Participatory Identification of poor
(PIP)
D
3. Promotion of Institutions of the
The experience from SGSY suggests that poor
the current BPL list has large inclusion
and exclusion errors. To widen the Strong institutions of the poor such as
target groups beyond the BPL list and to SHGs and their village level and higher
include all the needy poor, DAY-NRLM will level federations are necessary to provide
undertake community based process i.e. space, voice and resources for the poor
participation of the poor in the process of and for reducing their dependence on
identifying the target group. Participatory external agencies. They empower them
process based on sound methodology and also act as instruments of knowledge
and tools (social mapping and well-being and technology dissemination, and
categorization, deprivation indicators) hubs of production, collectivization and
and also locally understood and accepted commerce. DAY-NRLM, therefore, would
criterion ensures local consensus that focus on setting up these institutions
inadvertently reduces the inclusion and at various levels. In addition, DAY-NRLM
exclusion errors, and enables formation would promote specialized institutions
of the groups on the basis of mutual like Livelihoods collectives, producers’
affinity. Over the years, the participatory cooperative/companies for livelihoods
method of identifying the poor have been promotion through deriving economies of
developed and applied successfully in scale, backward and forward linkages, and
Annexure 69
access to information, credit, technology, 6. Revolving Fund and Community

markets etc. The Livelihoods collectives investment support Fund (C.I.F)
would enable the poor to optimize their
limited resource. A Revolving Fund would be provided to
eligible SHGs as an incentive to inculcate
the habit of thrift and accumulate their
4. Strengthening all existing SHGs
own funds towards meeting their credit
and federations of the poor needs in the long-run and immediate
There are existing institutions of the poor consumption needs in the short-run.
The C.I.F would be a corpus and used
women formed by Government efforts
for meeting the members’ credit needs
and efforts of NGOs. DAY-NRLM would
directly and as catalytic capital for
strengthen all existing institutions of the
leveraging repeat bank finance. The C.I.F
poor in a partnership mode. The self-
would be routed to the SHGs through the
T
help promoting institutions both in the
Federations. The key to coming out of
Government and in the NGO sector would
poverty is continuous and easy access
promote social accountability practices
to finance, at reasonable rates, till they
F
to introduce greater transparency. This accumulate their own funds in large
would be in addition to the mechanisms measure.
that would be evolved by SRLMs and
state governments. The learning from one 7. Universal Financial Inclusion
A
another underpins the key processes of
learning in DAY-NRLM. DAY-NRLM would work towards achieving
universal financial inclusion, beyond
R
basic banking services to all the poor
5. Emphasis on Training, Capacity
households, SHGs and their federations.
building and skill building DAY-NRLM would work on both demand
DAY-NRLM would ensure that the and supply side of Financial Inclusion.
D
poor are provided with the requisite On the demand side, it would promote
skills for managing their institutions, financial literacy among the poor and
provides catalytic capital to the SHGs
linking up with markets, managing
and their federations. On the supply side,
their existing livelihoods, enhancing
it would coordinate with the financial
their credit absorption capacity and
sector and encourage use of Information,
credit worthiness, etc. A multi-pronged
Communication & Technology (ICT)
approach is envisaged for continuous
based financial technologies, business
capacity building of the targeted families,
correspondents and community
SHGs, their federations, government
facilitators like ‘Bank Mitras’. It would also
functionaries, bankers, NGOs and other work towards universal coverage of rural
key stakeholders. Particular focus would be poor against loss of life, health and assets.
on developing and engaging community Further, it would work on remittances,
professionals and community resource especially in areas where migration is
persons for capacity building of SHGs and endemic.
their federations and other collectives.
DAY-NRLM would make extensive use of 8. Provision of Interest Subvention
ICT to make knowledge dissemination and
The rural poor need credit at low rate of
capacity building more effective.
interest and in multiple doses to make
70 Annexure
their ventures economically viable. In order 11. Intensive blocks

to ensure affordable credit, DAY-NRLM has
The blocks that are taken up for
a provision for subvention on interest rate
implementation of DAY-NRLM, ‘intensive
above 7% per annum for all eligible SHGs,
blocks’, would have access to a full
who have availed loans from mainstream
complement of trained professional staff
financial institutions.
and cover a whole range of activities of
universal and intense social and financial
9. Funding Pattern
inclusion, livelihoods, partnerships etc.
DAY-NRLM is a Centrally Sponsored However, in the remaining blocks or non-
Scheme and the financing of the intensive blocks, the activities may be
programme would be shared between limited in scope and intensity.
the Centre and the States in the ratio
of 75:25 (90:10 in case of North Eastern 12. Rural Self Employment Training
T
States including Sikkim; completely from Institutes (RSETIs)
the Centre in case of UTs). The Central
allocation earmarked for the States would RSETI concept is built on the model
F
broadly be distributed in relation to the pioneered by Rural Development Self
incidence of poverty in the States. Employment Institute (RUDSETI) – a
collaborative partnership between SDME
10. Phased Implementation Trust, Syndicate Bank and Canara Bank.
A
The model envisages transforming
Social capital of the poor consists of the unemployed youth into confident self-
institutions of the poor, their leaders, employed entrepreneurs through a short
R
community professionals and more duration experiential learning programme
importantly community resource persons followed by systematic long duration
(poor women whose lives have been hand holding support. The need-based
transformed through the support of their training builds entrepreneurship qualities,
D
institutions). Building up social capital improves self-confidence, reduces risk
takes some time in the initial years, but it of failure and develops the trainees into
multiplies rapidly after some time. If the change agents. Banks are fully involved
social capital of the poor does not play in selection, training and post training
the lead role in DAY-NRLM, then it would follow up stages. The needs of the poor
not be a people’s programme. Further, it articulated through the institutions of the
is important to ensure that the quality poor would guide RSETIs in preparing the
and effectiveness of the interventions participants/trainees in their pursuits of
is not diluted. Therefore, a phased self-employment and enterprises. DAY-
implementation approach is adopted NRLM would encourage public sector
in DAY-NRLM. DAY-NRLM would reach all banks to set up RSETIs in all districts of the
districts by the end of 12th Five-year Plan. country.
Annexure 71
Annex II
I. Interest subvention scheme v. Further, the SHGs will be provided
with an additional 3% subvention on
for Women SHGs the prompt repayment of loans. For
Interest subvention scheme on Credit to the purpose of Interest Subvention of
Women SHG for all Commercial Banks additional 3% on prompt repayment,
(only Public Sector Banks, Private Sector an SHG account will be considered
Banks and Regional Rural Banks) and Co- prompt payee if it satisfies the
operative banks in 250 districts following criterion.
i. All women SHGs will be eligible for a. For Cash Credit Limit
interest subvention on credit up to 3 i. Outstanding balance shall
lakhs at 7% per annum. SHG availing not have remained in excess
T
capital subsidy under SGSY in their of the limit /drawing power
existing credit outstanding will not be continuously for more than 30
eligible for benefit under this scheme. days.
F
ii. The Commercial Banks and ii. There should be regular credit
Cooperative Banks will lend to all the and debits in the accounts. In
women SHGs at the rate of 7% in the any case there shall be at least
250 districts. Annex III provides the one customer induced credit
A
names of the 250 districts. during a month.
iii. All Commercial Banks (excluding iii. Customer induced credit
RRBs) will be subvented to the extent
R
should be sufficient to cover
of difference between the Weighted the interest debited during the
Average Interest Charged (WAIC as month.
specified by Department of Financial
b. For the Term loans
D
Services, Ministry of Finance) and 7%
subject to the maximum limit of 5.5%. A term loan account where all of the
This subvention will be available to all interest payments and/or instalments
the Banks on the condition that they of principal were paid within 30 days
make SHG credit available at 7% p.a. of the due date during the tenure of
in the 250 districts. the loan, would be considered as an
account having prompt payment.
iv. RRBs and Cooperative Banks will be
subvented to the extent of difference All prompt payee SHG accounts as on
between the maximum lending rates the end of the reporting quarter will
(as specified by NABARD) and 7% be eligible for the additional interest
subject to the maximum limit of 5.5%. subvention of 3%. The banks should
This subvention will be available to credit the amount of 3% interest
all RRBs and Cooperative Banks on subvention to the eligible SHG loan
the condition that they make SHG accounts and thereafter seek the
credit available at 7% p.a. in the 250 reimbursement.
districts. RRBs and Cooperative Banks vi. The Interest Subvention scheme shall
will also get concessional refinance be implemented for all commercial
from NABARD. Detailed guidelines for banks (excluding RRBs) through a
RRBs and Cooperative Banks will be Nodal Bank selected by the Ministry
issued by NABARD. of Rural Development.
72 Annexure
vii. For the RRBs and Cooperative Banks NABARD - Regional Offices latest
the scheme will be operationalized by June every year, duly audited by
by NABARD similar to the short term Statutory Auditors certifying the
crop loan scheme. correctness.
viii. All Commercial Banks (including the xiii. Any remaining claim pertaining to
PSBs, Private Banks and RRBs) who the disbursements made during the
are operating on the Core Banking year and not included during the
Solutions (CBS) can avail the interest year, may be consolidated separately
subvention under the scheme. and marked as an 'Additional Claim'
ix. In order to avail the Interest and submitted to Nodal Bank (for
Subvention on credit extended to the all Commercial banks except RRBs)
SHGs @7%, regular subvention, all and NABARD Regional Offices (for all
commercial banks (excluding RRBs) RRBs and Cooperative Banks) latest
T
are required to upload the SHG loan by June every year, duly audited by
account information on the Nodal Statutory Auditors certifying the
Bank’s portal as per the required correctness.
F
technical specification. Banks must xiv. Any corrections in claims by PSBs and
submit the claims for 3% additional Pvt. Sector Banks shall be adjusted
subvention on the same portal. from later claims based on auditor’s
x. The claims submitted by bank should certificate. The corrections must be
A
be accompanied by a Statutory made on the nodal banks portal
Auditor’s certificate (in original) accordingly.
certifying the claims for subvention xv. For process of submission of claims
R
as true and correct. by RRBs and Cooperative Banks,
xi. In order to avail the Interest detailed guidelines will be issued by
Subvention on credit extended to the NABARD
SHGs @ 7%, all RRBs and Cooperative
D
Banks are required to submit their II. Interest subvention scheme
claims to respective NABARD -
Regional Offices on a quarterly basis
for Category II Districts (Other
as at June, September, December than 250 districts).
and March. The claims for the last For category II districts, comprising
quarter should be accompanied of districts other than the above 250
with a Statutory Auditor’s certificate districts, all women SHGs under DAY-NRLM
certifying the claims for the Financial will continue to be eligible for interest
Year as true and correct. The claims subvention to avail the loan facility at an
of any Bank for the quarter ending interest rate of 7%. The funding for this
March will be settled by MoRD only subvention will be provided to the State
on receipt of the Statutory Audited Rural Livelihoods Missions (S.R.L.Ms). The
certificate for the complete Financial State-wise distribution of the provision
Year by the Bank. under this budget head would be
xii. RRBs and Cooperative Banks may determined each year. In the Category II
submit their consolidated claims districts, Banks will charge the SHGs as
pertaining to the 3% additional per their respective lending norms and the
subvention on disbursements made difference between the lending rates and
during the entire year to respective 7% subjected to a maximum limit of 5.5%
Annexure 73
will be subvented in the loan accounts of ii. This scheme will be implemented by
the SHGs by the SRLM. In pursuance of the State Rural Livelihood Missions
the above, the salient features and the (SRLMs). SRLMs will provide interest
operational guidelines in respect of the subvention to the eligible SHGs who
interest subvention for the category II have accessed loan from Commercial
districts, are as follows: and Cooperative Banks. The funding
for this subvention will be met out
(A) Role of the Banks: of the Central Allocation: State
Contribution in the ratio of 75:25.
All banks who are operating on the Core
iii. The SHGs will be subvented with the
Banking Solution (CBS) are required
extent of difference between the
to furnish the details of the Credit
lending Rate of the banks and 7%
disbursement and Credit outstanding of
subjected to a maximum limit of 5.5%
the SHGs across all districts in the desired
T
by the SRLMs, directly on a monthly /
format as suggested by the MoRD, directly
quarterly basis. An e-transfer of the
from the CBS platform, to the Ministry of
subvention amount will be made by
Rural Development (through FTP) and to
F
the SRLM to the loan accounts of the
the SRLMs. The information should be
SHGs who have repaid promptly.
provided on a monthly basis to facilitate
the calculation and disbursement of the iv. Women SHGs who have availed
Interest Subvention amount to SHGs. capital subsidy under SGSY in their
A
existing loans, will not be eligible
(B) Role of the State Governments: for benefit of Interest Subvention
for their subsisting loan under this
R
i. All women SHGs, comprising of more scheme.
than 70% BPL or rural poor members
v. SRLMs should submit Quarterly
(rural poor as per the Participatory
Utilization Certificate indicating
Identification Process) are regarded
subvention amounts transferred to
D
as SHGs under DAY-NRLM. Such
the Loan accounts of the eligible
SHGs, comprising of rural poor
SHGs
members from the intended DAY-
NRLM target group will be eligible for The States with state specific interest
interest subvention on credit up to Rs. subvention schemes are advised to
3 lakhs at the rate of 7% per annum harmonize their guidelines with the Central
on prompt repayment. scheme.
74 Annexure
Annex III
List of 250 eligible Districts for the Interest Subvention on the loan at 7% and additional
interest Subvention of 3% on the prompt repayment.
Sl States Sl Name of districts Sl States Sl Name of districts

No No No No
1 Andhra 1 Guntur 16 Paschim
Pradesh Champaran
2 Krishna 17 Sitamarhi
3 Srikakulam 5 Chattisgarh 1 Balarampur
4 East Godavari 2 Surajpur
5 Vijaynagram 3 Sukama
T
6 Visakhapatnam 4 Kondagaon
2 Arunachal 1 East Siang 5 Gariyaband
F
Pradesh 6 Baloda Bazar
2 East Kameng 7 Dhamtari
3 Papumpare 8 Raigarh
4 Lohit 9 Bastar
A
3 Assam 1 Chirang 10 Bijapur
2 Karbi Anglong 11 Dantewada
3 Sonitpur 12 Jashpur
R
4 Tinsukiya 13 Kanker
5 Hailakandi 14 Kawardha
6 Dhemeji 15 Koriya
D
7 Jorhat 16 Narayanpur
8 Nagaon 17 Rajnandgaon
4 Bihar 1 Saharsa 18 Sarguja
2 Supaul 6 Gujarat 1 Chhotaudepur
3 Madhepura 2 Mahisagar
4 Nalanda 3 Mehsana
5 Khagria 4 Junagadh
6 EastChamparan 5 Vadodara
(Motihari) 6 Banaskantha
7 Arwal 7 Panchmahal
8 Aurangabad 7 Jharkhand 1 Pakkur
9 Gaya 2 Dumka
10 Jamui 3 Godda
11 Jehanabad 4 Bokarao
12 Kaimur 5 Chatra
13 Munger 6 Garhwa
14 Nawada 7 Giridh
15 Rohtas 8 Gumla
Annexure 75

No No No No
9 Hazaribagh 19 Sheopur
10 Khunti 20 Alirajpur
11 Kodarma 10 Maharashtra 1 Solapur
12 Latehar(N) 2 Ratnagiri
13 Lohardaga 3 Thane
14 Paschim 4 Wardha
Singhbhum 5 Beed
15 Palamu 6 Sindhurdurg
16 Purbi Singhbhum 7 Chandrapur
17 Ramgarh 8 Gadchiroli
T
18 Ranchi(Rural) 9 Gondia
19 Saraikela(N) 10 Jalna
20 Simdega(N) 11 Osmanabad
F
8 Karnataka 1 Bijapur 12 Nandurbar
2 Chamrajnagar 13 Yavatmal
3 Chitradurga 11 Odisha 1 Angul
A
4 Gulbarga 2 Bhadrak
5 Mysore 3 Balasore
6 Tumkur 4 Cuttack
R
7 Gadag 5 Balangir
8 Koppal 6 Devagarh
9 Madhya 1 Sager 7 Gajapati
Pradesh
D
8 Ganjam
2 Damoh 9 Jaipur
3 Tikamgarh 10 Kalahandi
4 Panna 11 Kandhamal
5 Chahatapur 12 Kendujhar
6 Jhabua 13 Koraput
7 Dhar 14 Malkangiri
8 Annupur 15 Mayurbhanj
9 Balaghat 16 Nabarangpur
10 Dindori 17 Nayagarh
11 Mandala 18 Nuapada
12 Seoni 19 Rayagada
13 Shahdol 20 Sambalpur
14 Sidhi 21 Sonapur
15 Umaria 22 Sundargarh
16 Chhindwara 12 Rajasthan 1 Dungarpur
17 Singrauli 2 Banswara
18 Badwani 3 Dholpur
76 Annexure

No No No No
4 Jhalawar 25 Banda
5 Baran 15 West Bengal 1 Alipurdwar
6 Ajmer 2 Purba Medinipur
7 Alwar 3 South 24 Parganas
8 Dausa 4 Bankura
9 Udaipur 5 Medinipur West
13 Tamil Nadu 1 Cuddalore 6 Coochbehar
2 Nagapattinam 7 Birbhum
3 Thanjaore 8 Puruliya
4 Trichy 16 Telangana 1 Mahabubnagar
T
5 Dindugal 2 Adilabad
6 Vilupuram 3 Warangal
7 Vellore 4 Khammam
F
8 Thiruvannamalai 5 Karimnagar
9 Dharmapuri 17 Kerala 1 Idukki
14 Uttar 1 Agra 2 Vayanadu
A
Pradesh 3 Pallakkad
2 Aligarh 4 Mallapuram
3 Auraiya 18 Haryana 1 Mahendergarh
R
4 Basti 2 Karnal
5 Bijnor 3 Jind
6 Lakhimpur Kheri 4 Mewat
7 Unnao
D
5 Bhiwani
8 Varanasi 6 Jhajjar
9 Bara banki 19 Himachal 1 Kangra
10 Gorakhpur Pradesh
11 Lucknow 2 Una
12 Chandauli 3 Shimla
13 Mirzapur 4 Mandi
14 Sonbhadra 20 Jammu & 1 Kupwara
15 Badaun Kashmir
16 Hardoi 2 Poonch
17 Etwah 3 Kistwar
18 Azamgarh 4 Ganderbal
19 Allahabad 5 Budgam
20 Ambedkarnagar 6 Udhampur
21 Bahraich 21 Punjab 1 Patiala
22 Deoria 2 Sangrur
23 Jalaun 3 Bathinda
24 Hamirpur 4 Tarn Taran
Annexure 77

No No No No
5 Gurdaspur 26 Nagaland 1 Kiphere
6 Ferozepur 2 Longleng
22 Uttrakhand 1 Pithoragarh 3 Peren
2 Pohri Garwal 4 Tuensang
3 Chamoli 5 Mon
4 Bageshwar 27 Tripura 1 Dhalai
23 Manipur 1 Chandel 2 West Tripura
2 Imphal East 3 North Tripura
24 Meghalaya 1 West Garo Hills 28 Puducherry 1 Puducherry
2 South West Khasi 29 Andaman 1 North & Middle
T
Hills & Nicobar Andhman Dist
3 West Khasi Hill Islands
25 Mizoram 1 Serchhip 30 Sikkim 1 South Sikkim
F
2 Aizwal 2 East Sikkim
3 Lunglei 31 Goa 1 North Goa
A
Annex IV
R
Branch Name:
Bank Name:
D
Progress report for
the month of ------, Block Name:
20-- District:
State:
No. of loans – Actual * ₹ lakhs

S. No of SHGs with SB account Credit Linked SHGs in the month Credit outstanding
No
New Loans Repeat Loans Cumulative
Total S/B New a/c Cumulative No of Amount No of Amount No of loans Amount No of Amount
accounts opened loans Disbursed* loans Disbursed* Disbursed* loans Outstanding*
till last this
month month
1(a) 1(b) 1(c) = 1(a)+1(b) 2(a) 2(b) 3(a) 3(b) 4(a) = 2(a)+3(a) 4(b)=2(b)+3(b) 5(a) 5(b)
*New loans: First linkage loans to be considered as the new loans

*Second and third linkage to be counted under repeat finance
*Credit Outstanding 5(a) and 5(b) should be inclusive of the cumulative credit disbursed in the month i.e. 5(a) = 4(b) + credit
outstanding till last month
78 Annexure
Annex V
Branch Name:
Bank Name:
Progress report for
the month of ------, Block Name:
20-- District:
State:
No. of loans – Actual * ₹ lakhs
T
Sl No of loan Amount Irregular accounts (4) Details of the
No accounts outstanding* NPA accounts (5)
No of accounts Overdue Amount* No of accounts Amount*
F
1 2 3 4(a) 4(b) 5(a) 5(b)
R A Appendix
D
No. Circular No. Date Subject
1. RPCD.GSSD. 27.06.2013 Priority Sector Lending –Restructuring of SGSY
CO.NO.81/09.01.03/2012-13 asNational Rural LivelihoodsMission(DAY-NRLM)-
Aajeevika
2. RPCD.GSSD.CO.BC. 20.09.2013 Credit Facility under NationalRural
No.38/09.01.03/2013-14 LivelihoodsMission(NRLM)- Aajeevika-Reporting
to RBI
3. RPCD.GSSD.CO.BC. 19.11.2013 Restructuring of SGSY as National Rural
No.57/09.01.03/2013-14 Livelihoods Mission (NRLM)-Aajeevika-Interest
Subvention Scheme
4. FIDD.GSSD.CO.BC. 09.12.2014 National Rural Livelihoods Mission(NRLM)-
NO.45/09.01.03/2014-15 Aajeevika- Interest Subvention Scheme
5. FIDD.GSSD.CO.BC. 21.01.2016 National Rural Livelihoods Mission(NRLM)-
NO.19/09.01.03/2015-16 Aajeevika- Interest Subvention Scheme 2015-16
6 FIDD.GSSD.CO.BC. 09.06.2016 National Rural Livelihoods Mission(NRLM)-
–Modification.
7 FIDD.GSSD.CO.BC. 25.08.2016 National Rural Livelihoods Mission(NRLM)-
Annexure 79
Annexure C
Sanitation Loan Products
A. Types of Loan products offered for sanitation improvements
Financial Institutions offer sanitation loans to households for the following products:
1. New Toilet Construction
2. Septic Tank Installation
3. Construction of Twin Leach Pit toilet
T
4. Connection to Sewerage network/Connection to Underground Drainage
5. Sanitation Renovation/ Retro-fitting of Toilet
F
B. Product Features
Sr. Particulars Norms
No.
A
1. Type of Facility Term Loan
2. Target Members of Self Help Groups or Joint Liability Groups
Segment
R
3. Loan Purpose Household Sanitation Improvement. Products covered include:
• New Toilet Construction
• Septic Tank Installation
D
• Construction of Twin Leach Pit
• Connection to Sewerage Network / Underground Drainage
• Renovation/ Retro-fitting of Toilet
• Loan Amount
4. ₹10,000 – 25,000 (on average)
Appraisal/estimate of the asset cost to be ascertained based on
specific sanitation product
5. Loan Tenor 1 to 2 years
6. Repayment Weekly/ Fortnightly/Monthly
7. Rate of 11% - 23%
Interest
8. Assessment Borrowers are eligible for a loan if they meet the following criteria:
Criteria (Best • Member of a SHG or JLG group
Practices)
• Member has undergone one loan cycle OR the sanitation loan
is an add-on loan
• Availability of space to construct a toilet asset
• The property should be owned by the applicant, co-applicant
or blood relative
80 Annexure
Sr. Particulars Norms

No.
9. Time for 90 days
completion of
asset
10. Repayment 98%
Rate
11. Monitoring Checks are carried out during collection meetings by loan/credit
and Asset officers. This includes:
Verification • Visit to the borrower 2 weeks from date of disbursement to
(Best Practices) verify that the pit(s) have been dug
• Follow up to verify that materials are bought and asset is
T
under construction
• Once complete, the loan officer verifies that the asset is
functional
F
• Photographs/ GPS co-ordinates of assets are taken at
intervals to record progress
R A
D
Annexure 81
Annexure D(a)
Objectives of the toilets but are not using it either due to
behavioral issues or lack of functionality
Questionnaire
Scenario 2: The data collected can also
The objectives of this questionnaire are be used to specifically know the socio
primarily to gauge the kind of issues economic profile which is accessing
people in districts with or without toilets financing for sanitation needs
are facing
Scenario 3: The variables measured in the
Once these problems are known, you can questionnaire can also be used to know
T
then use the data to find the quantum and the most prevalent channel of financing
source of financing required to address used in the district/block/village. eg. if a
them
F
particular block shows more SHGs present,
There can be multiple ways this can be then it can be used to target beneficiaries
used to determine how this will help in with financing for sanitation
effective decision making to address Scenario 4: The data captured in the
sanitation problems at multiple levels:
A
questionnaire can also be used to assess
Scenario 1: The data can be used to know the channel of financing to be used/being
if there are people who already have used to specific sanitation needs
R
Households with toilets
Name of surveyor
D
District
Block
Village
Date
Particulars Response
Name of Head of Family
Socio Economic Profile
Whether a member of any SHG or JLG
If yes, then name of the organization
Type of Toilet
Toilet Functioning
Toilet in daily use
Functional problem type
Willingness to repair the toilet
Source of funds
82 Annexure
Households without toilets

Name of surveyor
District
Block
Village
Date
Particulars Response
Name of Head of Family
Socio Economic Profile
Whether a member of any SHG
If yes, then name of the organization
T
Present place for defecation
Reason for not constructing toilet
F
Willingness to construct toilet
Source of funds
Type of toilet required
A
Data
APL Yes, SHG Yes
R
APL, IAY Yes, JLG No
APL, Widow No
APL (Other)
BPL
D
BPL, IAY
BPL, Widow
Landless
Twin Pit Single Pit Off Pit Septic with On Pit Toilet with Bio gas
Soak Pit Septic bathroom based
Super Sub Structure Pits are Pit covers are Sanitary Door is Pan is Just Nothing is
Structure Damaged damaged not available fittings are missing Broken unused available on
Damaged damaged ground
Self Financing Combination

required of both
Open Community Sharing Toilet

Toilet
Not covered in Adequate space Staying in Funds are not Other

BLS 12 is not available rented house available
Annexure 83
Annexure D(b)
Questionnaire for households with toilets
Date of Survey:
Name of
Surveyor
Name of
District
Name of
Block
T
Name of
Village
F
Name of Head of Family: _________________________________________________________
Socio-economic profile (check all that apply)
APL BPL APL (Other)
A
IAY Landless Widow
Is anyone in this household a member of SHG/JLG?
R
YES NO
If YES, then name of the organization: ____________________________________________________
Type of toilet
D
Single Pit Double Pit Off Pit
Septic with soak pit On pit septic Toilet with bathroom
Biogas based
Whether the toilet is functioning?
YES NO
Is the toilet being used daily?
YES NO
Type of problem with the toilet
Super structure damaged
Sub structure damaged Pits are damaged Septic with soak pit
Pit covers missing Sanitary fittings missing Door missing
Toilet pan broken Not using it No structure on ground
Willingness to repair the toilet
YES NO
Source of funds
Self Credit financing Combination of both
84 Annexure
Annexure D(c)
Questionnaire for households without toilets
Date of Survey:
Name of
Surveyor
Name of
District
Name of
Block
T
Name of
Village
F
Name of Head of Family: _________________________________________________________
Socio-economic profile (check all that apply)
APL BPL APL (Other)
A
IAY Landless Widow
Is someone in this household a member of SHG/JLG?
R
YES NO
If YES, then name of the organization: ____________________________________________________
Present place of defecation
D
Open Sharing toilet Community toilet
Reason for not constructing toilet
Not covered in BLS 12 Adequate space is not available
Staying in rented house Funds are not available Other
Willingness to construct toilet
YES NO
Source of funds
Self Credit financing Combination of both
Type of toilet required
Single Pit Double Pit Off Pit
Septic with soak pit On pit septic Toilet with bathroom
Biogas based
Annexure 85
Annexure E
86 Annexure
Annexure 87
88 Annexure
Annexure F
Credit Financing in Sanitation and Water Sector
Frequently Asked Questions (FAQs)
Part A: Credit Financing infrastructure’. Please refer to Annex A for

the RBI circular.
Related
What is credit financing? What is a SHG? Who is the
T
borrower in a SHG?
Credit financing is the use of credit (i.e.
a loan) to finance a purchase or activity. A Self-Help Group (SHG) is a small
F
Today there are many loan products voluntary association ofpeople,
available,for example: housing, education, preferably from the same socio-economic
vehicle, etc. In the conversation about background, coming together to solve
SBM and ODF, credit financing refers to their common problems through savings
A
making loans available to households for and credit. Successful SHGs are usually,
toilet construction and water connections but not always, formed with the support/
and to MSMEs that work in the sanitation guidance of local government, Self-Help-
R
supply chain. Promoting Institutions (SHPIs), NGOs or
other socially-oriented organizations.A
typical SHG has 15-20 members, and
What is Priority Sector Lending? Has
membership is expected to be long-term.
credit financing for sanitation and
D
SHG members would not typically be
water been approved by the RBI? considered eligible for bank credit as
Priority Sector Lending (PSL) is a regulation individuals, so this group is critical for
designed by the Reserve Bank of India members to build experience with formal
(RBI) to ensure that adequate funds are lending practices. All group members are
provided to sectors that are deemed expected to save a fixed amount of money
critical for India’s development. The RBI at a regular interval (such as monthly),
defines which sectors are designated as thus developing the habit of saving for
“priority”, and each bank in the country future investment. SHGs take out a loan
needs to ensure that a certain percentage from a bank in its group name, but then
allocate loan amounts internally, based
of its annual credit is directed to these
on need, purpose and accumulated
sectors. The required percentage is set at
savings. Because the bank loan is in
different levels for different categories of
the group name, all group members are
banks and is as follows: 40% for scheduled
responsible for ensuring 100% repayment
commercial banks, and 75% for regional
and covering for group members who fall
rural banks (RRBs) and small finance banks
behind in payments. Money from a bank
(SFBs).
loan will not be lent outside of the group.
Yes, credit financing for sanitation and SHG groups are generally successful due
water to individuals has been included to the social pressure that themutual
within PSL under the category of ‘social accountabilitystructure creates, and
Annexure 89
groups are typically able to borrow larger adequate coordination machinery on a

amounts from the bank over multiple loan uniform basis in all states. The main aim
cycles. is to provide collective action by financial
institutions in the implementation of
What is a JLG? Who is the borrower bankable schemes for the improvement of
in a JLG? the state economy. The SLBC is responsible
for coordinating the efforts of all credit
A Joint Liability Group (JLG) is variation of institutions in each district for expansion
the SHG modelstructured by microfinance of banking facilities and for meeting the
institutions (MFIs)to providesimilar group credit needs of the rural economy. The
lending opportunities for poor people Chairperson of SLBC is a state official
who are not in groups. Members of who is at the level of Chief Secretary/
the JLG are usually engaged in similar Development Commissioner or above.
type of economic activity. JLGs are a
T
more informal group comprising of 4-10 What is the DLCC and what does it
individuals. In this model, loans are given
do?
to individuals but, same as within a SHG
F
loan, the group is responsible for all The District Level Consultative
members’ repayment.JLG members are Committee (DLCC) is a district-level inter-
the borrowers and no one from outside institutional forum for coordination and
allowed to borrow loans. JLGs are usually joint implementation of development,
A
formed only for the purpose of obtaining programmed by all banks and financial
credit and do not, have the requirement of institutions as well as government
compulsory savings that exists in SHGs. departments. The DLCC helps find
R
solutions to problems hindering the
What is a Small Finance Bank? smooth functioning of the various
developmental activities, and raises
The small finance bank is a new category issues to the SLBC as needed. The District
D
of bank as licensed by the RBI.They have Collector is Chairperson of DLCC and
deep rural reach and are allowed to both heads quarterly review meetings.
receive deposits and provide loans to
their clients. The main objective of small
How successful has credit financing
finance banks is to provide unserved and
underserved sections of the population
for sanitation and water been in
with mechanisms to create savings.Other India?
objectives include to supply credit to In India, the concept of credit financing for
micro business units, small and marginal sanitation and water was started in 2004
farmersand other unorganised sector in Tamil Nadu and has rapidly evolved
entities through high technology, low- over the years. Today credit financing for
cost operations. Currently, 9 SFBs are sanitation and water is being made in 17
functional in the country. states, with over13 lakh loans aggregating
₹1865 crores have been successfully
What is the SLBC and what does it mobilized₹8,00,000 for toilets and ₹5,00,000
do? for water connections. The credit quality
has been exceptional with close to 100%
The State Level Bankers’ Committee (SLBC)
repayment rate. 98% of borrowers are
was constituted in April 1977 as an apex
women. Formerly considered consumptive,
inter-institutional forum uniting the RBI,
today, sanitation and water lending is
banks, NABARD, SIDBI and othersto ensure
90 Annexure
considered income-enabling and life- borrowing and the cost of operations.

enhancing. The primary source of funding for an MFI
It has been observed that families which is bank borrowing. Additionally, the BC/
pay monthly installments for their toilets MFIs utilize their extensive branch network
also tend to be more inclined to use them to reach the last mile consumers, which
daily and maintainthem better over time. requires more frequent staff visits to
households, increasing number of people
Why is it important to consider required and the overall costs. The high
cost of borrowing from banks and the cost
sanitation and water lending as a
of operations makes the interest rates
financial product?
of MFIs high. The RBI, however, caps the
As part of sanitation and water sector interest rate that each MFI can charge
growth, it becomes important to formalize through a formula.
sanitation and water lending as a
T
standalone financial product category like Is credit financing for sanitation and
education and affordable housing loans.
water a global phenomenon?
F
This has many benefits to both the banker
as well as the borrower, including: Lending to people in need so they can
 Establishes transparency and construct the toilet facility or water
enhanced MIS capability, with connection of their choice has been a
practice in various countries since 2004.
A
increased clarity on type of toilet
construction/repair. The interest in lending for this purpose
has grown considerably since the
 Supports asset verification once
United Nations enacted the Sustainable
R
toilet is constructed, providing ability
Development Goals (2015-2030), which
to understand specific reason for
loan and need to check if loan was include specific targets for “safely-
rightly used. managed sanitation” (SDG 6.1) and “safely-
D
managed drinking water” (6.2) (http://www.
 Gives opportunity for the RBI/banks
un.org/sustainabledevelopment/water-
to provide sanitation and water-
and-sanitation/). The World Bank has
specific interest subvention and other
projected a funding gap of three times the
similar schemes to boost the Swachh
current amount invested in sanitation and
program.
water, and sanitation occupies a larger
 Helps understand how toilet
share of that funding requirement. The
ownership is evolving at the village
global community has come to realize that
level, and help address both ODF and
new approaches to funding sanitation and
ODF-S challenges.
water solutions are required, and lending
 Gives pride and ownership to people to the poor for these purposes is gaining
that they have self-availed a specific increased attention and encouragement
lending provision. around the world. Today over 10 million
people globally have benefitted through
Why are the interest rates for BCs toilet and water loans.
and MFIs high? Is there a regulatory
cap on interest rates that an MFI can
charge?
The interest rate charged by any financial
institution is a function of its cost of
Annexure 91
Part B: District Implementation My district has achieved ODF, why

Related: is credit financing important to me?
Congratulations on the getting your
Sanitation and water loans are not district ODF! You may appreciate the fact
considered income generating. Why that ODF figures are only reflective of the
will people be interested in such a people covered in the baseline survey
and there are aconsiderable number
loan and repay timely?
of people not included in the list. These
Yes, sanitation and water loans are not people also have sanitation needs and
income-generating; but they are income this number further goes up if we consider
enabling. People endure a lot of challenges people who need retrofitting, modification,
and time wastage in open defecation repair of their toilets, bathing facilities,
T
and water collection. Removing these etc. Credit financing will help in providing
obstacles from their daily lives leaves capital to people who still need to build
them more time to utilize in productive and make improvements,but do not have
F
ways, not including the income saved capital up-front.Thus, it will prevent them
from reduced health problems and fewer from slipping back to open defecation.In
visits to the hospital.The costs that poor addition, as you know, models for MSMEs
people pay for sanitation and water – need to evolve for solid waste management
A
either directly through paying for water or and FSM, to ensure ODF sustainability.
indirectly through health improvements These enterprises will need credit
and increased productive time – tend to be financing to meet their working capital and
R
much higher than that paid by wealthier capital expenditure.
groups. In many cases, the obstacle for
poor people is lacking enough upfront My district is much behind achieving
investment money to create a household
ODF, why is credit financing
D
toilet and or water connection. When they
know about financial institutions offering
important to me?
micro-loans for creating such facilities- One of the many reasons that a district
loans in small installments that will not lags in achieving ODF is that its people
affect their routine family cash flows – they (eligible as per the base line survey) do
understand the long-term advantages and not have up-front capital to invest in
avail these loans. building their toilets before claiming the
The key drivers for sanitation and water SBM incentive. Credit financing unlocks
loans are time savings, convenience, this capital and makes it available to the
privacy, safety and health benefits. By people who can then build their toilets
establishing a sanitation or water facility without waiting to arrange funds from
at home, people feel more dignified: friends, relatives, or money lenders (who
they can use these facilities anytime. charge exorbitant rates). This has the
Furthermore, ensuring timely payment for potential to rapidly accelerate the toilet
these loans to own their toilet becomes an construction activity in the districts which
important milestone in their lives, and part are lagging in achieving ODF status.
of their individual success story.
92 Annexure
Which type of sanitation and water apply: thePrime Minister Employment

products are currently supported Generation Programme (PMEGP) and the
Credit Guarantee Trust Fund for Micro
through credit financing?
& Small Enterprises (CGT SME). Other
Financial Institutions offer loans for schemes supported by state and central
creating access to safe drinking water and government to promote entrepreneurship
improved sanitation. The loan products include Micro Units Development and
financed include: Refinement Agency Ltd. (MUDRA), Standup
India and MukhyamantriSwarojgarYojna.
 Household Water Connections/Water
filters/Rain Water Harvesting
Which case studies should I read to
 Construction of Household toilets
understand how best to link the SBM
o Toilet with sceptic tank
incentive with credit financing?
o Toilet with twin pit
T
Please refer to Case Study #12 (Dharwad),
o Eco-San toilet
and Case Study #13 (Madurai) to learn
 Retrofitting of toilets/Upgradation of from two successful but distinct examples
F
toilets of linking the SBM incentive with credit
 Addition of bathing facilities financing.
 Sanitation Marts/FSM enterprises
How do I initiate credit financing for
A
 Community water purification
enterprises sanitation and water in my district?
Credit financing for sanitation and
R
Is there a way that credit financing water can be promoted by increasing
can support local sanitation awareness within local and administrative
entrepreneurs? communities, as well as asking local SHGs/
JLGs/RRB/Banks to provide borrowing for
D
There are numerous schemes undertaken sanitation and water purposes. Case Study
by the Government Ministry of Micro, #12 provides step-by-step details on how to
Small and Medium enterprises to implement these mechanisms in your state.
facilitate adequate flows of credit from Additionally, case studies#11(Dharwad)
financial institutions to MSMEs, and start- and #13 (Madurai) provide details on other
up sanitation entrepreneurs can also successful methods.

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Credit Financing in the Sanitation and Water Sector i

Disclaimer and Notice to Reader

Adhikar- Bhubaneshwar, Odisha

Cashpor- Micro Credit, Varanasi, UP

CEO, Zilla Panchayath, Dharwad, Karnataka

GAP Foundation- New Delhi, Delhi

IDFC Bharat- Trichy, Tamil Nadu

MythriSarvaSevaSamithi- Bangalore, Karnataka

UNICEF- New Delhi, Delhi and Mumbai, Maharashtra

Water.org- Chennai, Tamil Nadu

2. Need for Credit 2

4.1. Household Lending 3

4.3. Current Models 4

7. SHG Model: Case Study + Video (DHAN Foundation, Tamil Nadu) 7

9. Bank-BC Model: Case Study + Video (IDFC Bharat, Tamil Nadu) 16

11. Building an Integrated District Level WSS Ecosystem:

Case Study (Maharashtra) 25

12. Integrating credit financing with the SBM incentive:

13. Established MOU and targets with Financial Institutions:

14. Voice of Customer: Reflections of various credit customers:

One-page Guidance Notes 38

15. One-page Guidance Note for SBM Mission Directors 38

16. One-page Guidance Note for District Collectors 40

17. One-page Guidance Note for Front-line Workers 42

A. RBI 2015 guideline approving water and sanitation as part

B. RBI 2017 guideline including toilet as an eligible category

C. Master list of currently available sanitation loan products 79

D. Template for capturing credit requirements at village level 81

E. Copy of MOU between District of Madurai DRDA and

F. Frequently Asked Questions 88

G. Presentation on Credit Financing for WASH

H. Presentation by DHAN Foundation

BPL Below Poverty Line

CHF Community Health Facilitator

CoM Community Mobilizer

DDC District Development Committee

DLRC District Level Review Committee

DPRO District Panchayat Raj Officer

IHHL Individual Household Latrines

JLG Joint Liability Group

MUDRA Micro Units Development and Refinance Agency

MSME Micro, Small and Medium Enterprise

MDWS Ministry of Drinking Water and Sanitation

MoF Ministry of Finance

MOU Memorandum of Understanding

NRLM National Rural Livelihoods Mission

ODF Open Defecation Free

PDO Panchayat Development Officer

PRI Panchayati Raj Institution

PRS Panchayati Raj System

PSB Public Sector Banks

RBI Reserve Bank of India

RRB Regional Rural Bank

SBCC Sanitation Behavior Change Communication

SBM Swachh Bharat Mission

SFB Small Finance Bank

SHG Self-Help Group

SHGPI Self-Help Group Promoting Institution

SRLM State Rural Livelihoods Mission

Category of Why the need for credit exists

New households since base line survey

Require up-front/bridge funding before they can avail of the

Water connections/ filters/ rainwater harvesting structures