With reference to Self-Help Groups (SHGs), consider the following statements: 1. A typical SHG has 15-20 members, usually belonging to one neighbourhood. 2. Members can take small loans from the group itself, but the group does not charge any interest on these loans. 3. If the group is regular in savings, it becomes eligible for availing a loan from the bank. Which of the statements given above is/are correct?

Explanation The correct option is 1 and 3 only. Self-Help Groups (SHGs) are small, informal associations of people, typically from similar socio-economic backgrounds, who come together to solve common problems through mutual help and financial intermediation. They are a key instrument for poverty alleviation and financial inclusion in India. - Statement 1 is Correct: A typical SHG consists of 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. This size is considered optimal for effective democratic functioning and peer monitoring. - Statement 2 is Incorrect: While members can take small loans from the group itself to meet their needs, the group does charge interest on these loans. The interest rate is decided by the group members and is typically lower than what informal moneylenders charge. The interest income helps grow the group's common fund. - Statement 3 is Correct: After a year or two, if the group is regular in savings, it becomes eligible for availing a loan from the bank. This is known as the SHG-Bank Linkage Programme. The loan is sanctioned in the name of the group to create self-employment opportunities for members. Key Takeaway: SHGs charge interest on internal loans to maintain financial discipline and grow their corpus. Bank loans are extended to the group (not individuals directly) based on the group's track record of regular savings.

NCERT Class 10 Economics — Chapter 3: Money and Credit

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With reference to Self-Help Groups (SHGs), consider the following statements:

A typical SHG has 15-20 members, usually belonging to one neighbourhood.
Members can take small loans from the group itself, but the group does not charge any interest on these loans.
If the group is regular in savings, it becomes eligible for availing a loan from the bank.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B1 and 3 only
C2 only
D1 and 2 only

Did you get this right?

Solution

Explanation

The correct option is 1 and 3 only.

Self-Help Groups (SHGs) are small, informal associations of people, typically from similar socio-economic backgrounds, who come together to solve common problems through mutual help and financial intermediation. They are a key instrument for poverty alleviation and financial inclusion in India.

Statement 1 is Correct: A typical SHG consists of 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. This size is considered optimal for effective democratic functioning and peer monitoring.
Statement 2 is Incorrect: While members can take small loans from the group itself to meet their needs, the group does charge interest on these loans. The interest rate is decided by the group members and is typically lower than what informal moneylenders charge. The interest income helps grow the group's common fund.
Statement 3 is Correct: After a year or two, if the group is regular in savings, it becomes eligible for availing a loan from the bank. This is known as the SHG-Bank Linkage Programme. The loan is sanctioned in the name of the group to create self-employment opportunities for members.

Key Takeaway:
SHGs charge interest on internal loans to maintain financial discipline and grow their corpus. Bank loans are extended to the group (not individuals directly) based on the group's track record of regular savings.

Your note

More from Chapter 3: Money and Credit

Consider the following statements regarding the impact of high cost of borrowing: 1. A larger part of the earnings of the borrowers is used to repay the loan. 2. The repayment amount is always less than the income of the borrower. 3. It may discourage people from starting enterprises due to the debt burden. Which of the statements given above is/are correct?

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Consider the following statements regarding the 'Cheque' facility: 1. The payee instructs the bank to withdraw money from the payer's account. 2. It allows for the direct settlement of payments without the use of cash. 3. Cheques are a form of currency issued by the RBI. Which of the statements given above is/are correct?

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With reference to the credit needs in rural areas, consider the following statements: 1. The main demand for credit is for crop production. 2. There is no time gap between buying inputs and selling the crop. 3. Repayment of the loan is crucially dependent on the income from farming. Which of the statements given above is/are correct?

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Consider the following statements regarding the 'Krishak Cooperative': 1. It does not accept deposits from its members. 2. It uses deposits as collateral to obtain a large loan from the bank. 3. It provides loans for various purposes including house construction. Which of the statements given above is/are correct?

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Consider the following statements regarding the supervision of credit activities in India: 1. The World Bank supervises the functioning of formal sources of loans. 2. There is no organisation that supervises the credit activities of lenders in the informal sector. 3. Banks are not required to share any lending information with the RBI. Which of the statements given above is/are correct?

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Explanation

The correct option is 1 and 3 only.

Statement 1 is Correct: A typical SHG consists of 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. This size is considered optimal for effective democratic functioning and peer monitoring.
Statement 2 is Incorrect: While members can take small loans from the group itself to meet their needs, the group does charge interest on these loans. The interest rate is decided by the group members and is typically lower than what informal moneylenders charge. The interest income helps grow the group's common fund.
Statement 3 is Correct: After a year or two, if the group is regular in savings, it becomes eligible for availing a loan from the bank. This is known as the SHG-Bank Linkage Programme. The loan is sanctioned in the name of the group to create self-employment opportunities for members.