With reference to the Self-Help Group (SHG) linkage programme, consider the following statements: 1. SHGs are discouraged from saving money and must rely solely on government grants. 2. The government provides partial financial assistance to SHGs through banks. 3. The government decides the individual beneficiaries for loans, bypassing the SHG members. Which of the statements given above is/are correct?

Correct Option The correct option is 2 only. Explanation The Self-Help Group (SHG) Bank Linkage Programme aims to connect informal savings groups with the formal banking system to ensure financial inclusion. Under initiatives like the Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM), SHGs are nurtured to become self-sustainable financial intermediaries. Statement-wise Analysis - Statement 1 is Incorrect. The core philosophy of an SHG is thrift and credit. Members are explicitly encouraged to save small amounts regularly to build a group corpus. Internal lending from these pooled savings is a prerequisite before the group approaches banks for larger loans. They do not rely solely on grants. - Statement 2 is Correct. The government provides financial support to SHGs to enhance their creditworthiness. This includes a Revolving Fund (RF) and Community Investment Fund (CIF). Furthermore, the government provides Interest Subvention to SHGs on loans availed from banks, effectively providing partial financial assistance linked to bank credit. - Statement 3 is Incorrect. SHGs operate on democratic principles. The group members collectively decide which member receives a loan, the loan amount, and the repayment terms based on need and repayment capacity. The government or the bank does not decide individual beneficiaries; the loan is sanctioned to the group as a collective entity. Key Takeaway: SHGs are autonomous, savings-led groups where decision-making regarding loan distribution resides with the members, not external agencies. Banks lend to the group as a whole based on its savings history and internal discipline.

NCERT Class 11 Economics — Chapter 4: Poverty

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With reference to the Self-Help Group (SHG) linkage programme, consider the following statements:

SHGs are discouraged from saving money and must rely solely on government grants.
The government provides partial financial assistance to SHGs through banks.
The government decides the individual beneficiaries for loans, bypassing the SHG members.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

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

Did you get this right?

Solution

Correct Option

The correct option is 2 only.

Explanation

The Self-Help Group (SHG) Bank Linkage Programme aims to connect informal savings groups with the formal banking system to ensure financial inclusion. Under initiatives like the Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM), SHGs are nurtured to become self-sustainable financial intermediaries.

Statement-wise Analysis

Statement 1 is Incorrect. The core philosophy of an SHG is thrift and credit. Members are explicitly encouraged to save small amounts regularly to build a group corpus. Internal lending from these pooled savings is a prerequisite before the group approaches banks for larger loans. They do not rely solely on grants.
Statement 2 is Correct. The government provides financial support to SHGs to enhance their creditworthiness. This includes a Revolving Fund (RF) and Community Investment Fund (CIF). Furthermore, the government provides Interest Subvention to SHGs on loans availed from banks, effectively providing partial financial assistance linked to bank credit.
Statement 3 is Incorrect. SHGs operate on democratic principles. The group members collectively decide which member receives a loan, the loan amount, and the repayment terms based on need and repayment capacity. The government or the bank does not decide individual beneficiaries; the loan is sanctioned to the group as a collective entity.

Key Takeaway: SHGs are autonomous, savings-led groups where decision-making regarding loan distribution resides with the members, not external agencies. Banks lend to the group as a whole based on its savings history and internal discipline.

Your note

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Correct Option

The correct option is 2 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. The core philosophy of an SHG is thrift and credit. Members are explicitly encouraged to save small amounts regularly to build a group corpus. Internal lending from these pooled savings is a prerequisite before the group approaches banks for larger loans. They do not rely solely on grants.
Statement 2 is Correct. The government provides financial support to SHGs to enhance their creditworthiness. This includes a Revolving Fund (RF) and Community Investment Fund (CIF). Furthermore, the government provides Interest Subvention to SHGs on loans availed from banks, effectively providing partial financial assistance linked to bank credit.
Statement 3 is Incorrect. SHGs operate on democratic principles. The group members collectively decide which member receives a loan, the loan amount, and the repayment terms based on need and repayment capacity. The government or the bank does not decide individual beneficiaries; the loan is sanctioned to the group as a collective entity.