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Context:
The FY26 Budget proposed introducing a Grameen Credit Score framework for assisting 100 million rural Self help Groups (SHG) members access credit at an individual level. Through SHG repayment records, the public sector banks will allocate a credit score for individual members thereby enhancing the country’s financial inclusion.
Key Highlights:
The Grameen Credit Score Framework
- The existing regulations were not able to let banks advance loans to members of an SHG on the strength of the performance of the group.
- Now, a strong repayment record of an SHG is acceptable by the new guidelines as an argument to offer credit scores to its members.
- It would enable a higher degree of rural and semi-urban access while trying to keep bad loan losses in control.
Expert Recommendations and Policy Changes
- Two expert groups from the finance and rural development ministries proposed the idea in FY25.
- Banking regulations will be updated to facilitate individual borrowing based on SHG performance.
- SHG members with good group credit history will have better access to loans from formal banks.
Economic Impact and Implementation
- It is going to promote mass access to credit in rural areas.
- This facility will empower members of a SHG to apply individually for loans on the strength of the credit rating of their own SHG.
- The rural development ministry has partnered with:
- The Government e-Marketplace (GeM) to spur the sale of products by the SHG.
- E-commerce platforms including Flipkart, Amazon, Meesho can be availed to expand SHG artisans weavers, craftsman’s reach into the marketplace.
