With reference to the functioning of SHGs, consider the following statements: 1. Banks are willing to lend to SHGs once they have a track record of savings. 2. Non-repayment by a member is ignored by the group. 3. Regular meetings of the group provide a platform to discuss social issues. Which of the statements given above is/are correct?

Correct Option The correct option is 1 and 3 only. Explanation Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions. They function on the principles of thrift, credit, and mutual help, serving as a key instrument for financial inclusion and social empowerment in rural India. Statement-wise Analysis - Statement 1 is Correct: The SHG-Bank Linkage Programme (SBLP) operates on the premise that SHGs must demonstrate financial discipline before accessing formal credit. Banks are willing to lend to SHGs only after they have established a consistent track record of regular savings and internal lending (inter-loaning) for a specified period (usually six months). - Statement 2 is Incorrect: The fundamental mechanism ensuring repayment in SHGs is "peer pressure." Since loans are often collateral-free and based on mutual trust, the group is collectively responsible for repayment. Non-repayment by a member is taken very seriously and is not ignored, as it jeopardizes the group's creditworthiness and ability to secure future loans from banks. - Statement 3 is Correct: Beyond financial intermediation, SHGs serve as vital platforms for social mobilization. Regular meetings provide an opportunity for members to discuss and act on various social issues such as health, nutrition, domestic violence, sanitation, and education, thereby fostering social capital. Key Takeaway Key Takeaway: SHGs function on the twin pillars of financial discipline (savings-led credit) and social capital (peer monitoring and collective action). Peer pressure acts as the substitute for physical collateral in the SHG banking model.

NCERT Class 10 Economics — Chapter 3: Money and Credit

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With reference to the functioning of SHGs, consider the following statements:

Banks are willing to lend to SHGs once they have a track record of savings.
Non-repayment by a member is ignored by the group.
Regular meetings of the group provide a platform to discuss social issues.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 2 only
B2 only
C1, 2 and 3
D1 and 3 only

Did you get this right?

Solution

Correct Option

The correct option is 1 and 3 only.

Explanation

Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions. They function on the principles of thrift, credit, and mutual help, serving as a key instrument for financial inclusion and social empowerment in rural India.

Statement-wise Analysis

Statement 1 is Correct: The SHG-Bank Linkage Programme (SBLP) operates on the premise that SHGs must demonstrate financial discipline before accessing formal credit. Banks are willing to lend to SHGs only after they have established a consistent track record of regular savings and internal lending (inter-loaning) for a specified period (usually six months).
Statement 2 is Incorrect: The fundamental mechanism ensuring repayment in SHGs is "peer pressure." Since loans are often collateral-free and based on mutual trust, the group is collectively responsible for repayment. Non-repayment by a member is taken very seriously and is not ignored, as it jeopardizes the group's creditworthiness and ability to secure future loans from banks.
Statement 3 is Correct: Beyond financial intermediation, SHGs serve as vital platforms for social mobilization. Regular meetings provide an opportunity for members to discuss and act on various social issues such as health, nutrition, domestic violence, sanitation, and education, thereby fostering social capital.

Key Takeaway

Key Takeaway: SHGs function on the twin pillars of financial discipline (savings-led credit) and social capital (peer monitoring and collective action). Peer pressure acts as the substitute for physical collateral in the SHG banking model.

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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Correct Option

The correct option is 1 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Correct: The SHG-Bank Linkage Programme (SBLP) operates on the premise that SHGs must demonstrate financial discipline before accessing formal credit. Banks are willing to lend to SHGs only after they have established a consistent track record of regular savings and internal lending (inter-loaning) for a specified period (usually six months).
Statement 2 is Incorrect: The fundamental mechanism ensuring repayment in SHGs is "peer pressure." Since loans are often collateral-free and based on mutual trust, the group is collectively responsible for repayment. Non-repayment by a member is taken very seriously and is not ignored, as it jeopardizes the group's creditworthiness and ability to secure future loans from banks.
Statement 3 is Correct: Beyond financial intermediation, SHGs serve as vital platforms for social mobilization. Regular meetings provide an opportunity for members to discuss and act on various social issues such as health, nutrition, domestic violence, sanitation, and education, thereby fostering social capital.