Economics · Economy
A rural public sector bank branch has successfully linked 150 Self Help Groups (SHGs) under DAY-NRLM. Out of these, 130 groups are paying on time, while 20 groups (formed politically with no record-keeping or adherence to Panch Sutras) have turned into NPAs. The 130 successful groups are now demanding higher credit limits to start a solar lamp assembly unit. What is the most critical and sustainable step for the branch manager to ensure the long-term health of this portfolio?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Increase the interest rate for the successful groups to 18 percent to cross-subsidize and recover losses from the 20 NPA accounts.
- 2Close the savings accounts of all 150 groups and freeze all microfinance activities to prevent further non-performing assets.
- 3Conduct a fresh grading and social audit of the 130 groups to ensure their enterprise readiness, and initiate a structured recovery process for the NPAs through the Village Organization.✓
- 4Immediately sanction the 10 lakh rupee loans to the 130 groups to meet priority sector targets and ignore the NPA accounts to avoid political sensitivity.
Correct answer
Conduct a fresh grading and social audit of the 130 groups to ensure their enterprise readiness, and initiate a structured recovery process for the NPAs through the Village Organization.
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