Economics · Financial Inclusion and Microfinance
Under the Self-Help Group-Bank Linkage Programme (SHG-BLP) model, what is the most significant operational and financial advantage for a commercial bank compared to individual micro-lending?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is legally permitted to levy significantly higher interest rates than corporate loans.
- 2The SHG acts as social collateral and manages localized recovery, drastically reducing transaction costs and credit risk.✓
- 3The bank receives a 100 percent sovereign guarantee from the Central Government against all credit defaults.
- 4The bank is exempted from complying with the Reserve Bank of India's prudential norms for asset classification.
Correct answer
The SHG acts as social collateral and manages localized recovery, drastically reducing transaction costs and credit risk.
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