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MICRO FINANCE BY BANKS IN INDIA
Article · December 2012
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16
Research Explorer July - December 2012
Vol . I : Issue. 2 ISSN:2250 - 1940
MICRO FINANCE BY BANKS IN INDIA
Dr. C. Paramasivan, Ph. D.,
Assistant Professor & Research Supervisor
R. Anandaraman
Ph. D Full Time Research Scholars
PG & Research Department of Commerce, Periyar EVR College, Trichy – 23
ABSTRACT
Micro finance is the basic concepts helping to self-employment people, low income groups, poor entrepreneurs
in rural areas. It provides thrift, credit, savings and other financial services and products of small amount to
poor in rural, semi urban or urban areas. Micro finance is the target raising their income, improve standard
living, increasing economic growth, and reduce poverty. Micro finance is another aspect given empowers to
poor women especially for handicapped women, divorce women, widow women. This paper focus on the role
of banks in micro finance in India
Key words: Entrepreneurship, Eradication of Poverty, Social Capital, Bank Finance
Introduction
The term Micro finance refers to extending
the whole range of financial services from savings
to credit to micro insurance to micro enterprises
and a lot more for the poorer sections of society
whose scale of operations are so small and hence
are generally excluded from the purview of the
existing service providers. The effectiveness of
microfinance is better realized by the deprived
sections when their capacities are also enhanced
along with access to financial services. In the Indian
context, the search for supplementary delivery
mechanism to provide microfinance started with
internal introspection regarding the innovations,
which the poor had been traditionally making, to
meet their financial service needs.
Micro Finance
The concept of micro finance was introduced
Grammen bank of Bangladesh by Mohammed
yunus severing over 7.34 million people with
recovery rate of 98.35 percent. Micro finance refers
to the provision of financial service to low income
groups and self employment people. Micro finance
has come to include a broader range of services
like saving, credit, insurance, remittance,
marketing, money transfer, life cycle product, fund
transfer etc. Microfinance means provide small
loans to poor families helping them to engage in
productive activities of small business namely petty
shop ,flower shop, idly shop, candle making,
vegetables, vending, wire basket, weaving etc.
Review of literature
Amutha. J and Ramakrishnan (2011) suggest
that the Government of India encourages
entrepreneurship among micro entrepreneurs
through EDP. Cooperative banks linkage to retail
credit outlets of the formal banking sector
comprising 12,000 branches of district-level
cooperative banks, over 14,000 branches of
Regional Rural banks and over 30,000 rural and
semi-urban branches of commercial banks; in
addition to 1,12,000 cooperative credit societies at
village level.
Kayar Kami (2011) concluded that the Self Help
Group really helps the women folk to participate in
organized activities apart from helping members
to mobilize funds. The present study concludes that
the respondents are economically and social
empowered by becoming members of SHGs in
Tuticorin District.
Research Explorer
ISSN : 2250 - 1940
Vol I : Issue. 2
July - December 2012

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Research Explorer July - December 2012
Vol . I : Issue. 2 ISSN:2250 - 1940
Saravanan. S (2008) said that micro finance
Programmes have proved that is an effective
instrument for eradication of poverty. The spread
of micro finance and the mobilization of women
serve the twin purposes for enabling the state to
withdraw from economic activities and diffusing
any form of resistance against the state in the
present economic conditions.
Narbada Ghimire (2011) concluded that even
though microfinance collateralizes social capital
and makes credit accessible to the poor more than
traditional banking institutions, some of the
poorest women remain excluded, particularly those
who might represent high risk in the eyes of other
group members who evaluate the appropriateness
of loan.
Narayanan. B (2008) pointed that micro credit
Programme has become an important tool to
eradicate poverty in India. It is gathering
momentum to become a major force in India. The
Self-help groups (SHG) model with bank lending
to groups of poor women without collateral has
become an accepted part of rural finance.
Table – 1 Savings of SHGs with Banks
Agency –Wise
(Rs. in Lakhs)
Soruce: NABARD Report 2011
Table no 1 indicates that the savings of SHG
with bank wise position as on 31st
March 2011.
There are 4323473 Lakhs SHG opened account
with commercial bank, of wise 3655322 Lakhs SHG
exclusively belongs to women. Savings of the SHG
with commercial banks amounted to Rs. 42300.42
Lakhs off which Rs. 332560.07 Lakhs by women
SHG. Savings of the SHG with Co-operative banks
amounted to Rs. 135084.19 Lakhs of which Rs.
78059.57 Lakhs by women SHG. Savings of the
Regional bank Rs. 143539.67 Lakhs off which Rs.
119244.83 Lakhs by women SHG. As on whole,
there are 7461946 SHG were opened account with
banks and saving amounted to Rs. 701630.28
Lakhs off which 6098034 SHG exclusively belongs
to women SHG and their savings amounted to Rs.
529864.47 Lakhs.
Table – 2 Bank Loans Disbursed to SHGs
Agency-wise
(Rs. in Lakhs)
Source: NABAR Report 2011
Table no 2 reveals that the loan disbursed
to SHG with bank position as on 31st
March
2011.commercial bank disbursed loans to 667941
SHG which amounted to Rs. 972455.27 Lakhs of
which Rs. 879829.07 Lakhs disbursed exclusively
to women SHG during the period. Co- operative
bank disbursed loans to 229620 SHG which
amounted to Rs. 162556.33 Lakhs off which Rs.
95956.54 Lakhs disbursed exclusively to women
SHG during period 2011. Regional rural bank
disbursed loans to 296773 SHG which amounted
to Rs. 319761.59 Lakhs off which Rs. 286447.78
Lakhs disbursed exclusively to women SHG during
the perid-2011. As on whole Rs. 145477.19 Lakhs
disbursed to 1196134 SHG which includes Rs.
1262233.39 Lakhs exclusively to 1017218 women
SHG
Table – 3 Bank Loans Outstanding Against
SHGs Agency - Wise
(Rs. in Lakhs)
Source: NABARD Report 2011
Table 3 reveals that the bank loans outstanding
against SHGs wish position as on 31st
March 2011.
Rs. 2188325.67 Lakhs loan outstanding in
commercial banks including of Rs. 1848765.4
Lakhs exclusively from women SHG Rs. 190785.65

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Research Explorer July - December 2012
Vol . I : Issue. 2 ISSN:2250 - 1940
Lakhs outstanding. In co-operative banks including
of Rs. 114678.62 Lakhs exclusively from women
SHG Rs. 743005.23 Lakhs loan outstanding. In
regional rural bank including of Rs. 648931.55
Lakhs exclusively from women SHG. The table
concludes that the total loan outstanding amounted
to Rs. 3122116.55 Lakhs which includes Rs.
2612375.57 Lakhs exclusively women SHG.
Table – 4 Non Performing Assets of Bank
against SHGs Loans Outstanding
(Rs. in Lakhs)
Source: NABARD Report 2011
It is seen from above table no 4 that
nonperforming assets of banks against SHGs loans
outstanding bank wise position as on 31st
March
2011. NPAs against SHG were highly recorded in
co-operative banks (7.04%) followed by commercial
banks (4.88%) and regional rural bank (3.67%)
average NPAs against SHG as march 31st
2011 is
4.72 percent. Commercial bank placed first in
amount wise NPAs (Rs. 106698.92 Lakhs) followed
by regional rural bank (27281.73 Lakhs) and co-
operative bank (Rs. 13430.15 Lakhs).
Table - 5 Bank Loans provided to MFIs
during 2010-2011 and Loans outstanding
(Rs. in Lakhs)
Source: NABARD Report 2011
It is seen from the above table no 5 that the
loans provided to MFIs during 2010-2011 and loan
outstanding as on 31st
March 2011. Commercial
banks provided loans to SHG through 460 MFIs
amounted to Rs. 760102.33 Lakhs regional rural
bank provided loans to SHG through 9 MFIs
provided loans to SHG through has not applicable.
As on total there are 469 MFIs were disbursed loans
to the SHG which amounted to Rs. 760518.02
Lakhs.
Suggestions
Banks are playing a key role in the field of socio
economic development of the country trough
providing micro finance to the rural women SHG
in the country. With the help of SHG, mobilisations
of micro savings in the banks have been increased
in a remarkable position. Hence, bank and micro
finance is the interdependent mechanism which
promotes the smooth running of the banking
services as well as SHG.
SHGs in the India is one of the largest
segment in the world which consists of 43, 23,473
groups with the savings of Rs.423006.42 Lakhs in
the year 2011.This is one of the notable
achievement of the SHG with help of bank and
micro finance institution. Hence, the
Banks the banks should encourage the SHG to
increase the savings habits also deal more micro
finance Bank financial assistance to SHG is not in
appreciable manner due to adverse mantality of
the banking personnel. Hence, the banking
personnel should change their attitude towards the
SHG
Loan distributed to SHG by banks during the
year 2011 is also progressive trends as compare to
the previous years. Commercial banks are the
largest loan distributors to the SHG. But it compare
to the saving of SHG, the amount of loan will be
nominal. Hence, the commercial banks should
come forward to liberalise the loans to the SHG
Loan outstanding is one of the indicators which
reflect the repayment of the loan wider in a time.
Most of the banks are unable to recover their loans
to weaker section and poor people due to personal
and political reason. In the situation bank should
develop a voluntary mechanism to reduce the loan
outstanding in due course.
NPA against SHG loans is also quit common,
which can not eliminate completely. The banks
should aware about the utilization of the loans
amount by the beneficiary
Conclusion
Micro finance is an important tool of poverty
alleviation programmee in India which helps to
reduce the poverty in rural areas. Overall
performance of micro finance, commercial bank has
good performance in India. Co-operative bank has
very poor performance of microfinance through self
help groups. Regional rural bank must improve the
overall progress of MF. Especially the banker

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Research Explorer July - December 2012
Vol . I : Issue. 2 ISSN:2250 - 1940
provided credit to MFI has poor performance in
India. Banks are responsible to actively involved
in the field of Micro finance wide social development
of the country. Cooperative banks must meet the
rural people to promote the Micro credit and provide
liberal micro finance to needed people and make
them as a self sustainable person in the society.
Reference
1. Amutha. J and Ramakrishnan. (2011). Role of
women Self Help Groups in Co-operative Bank
Linkage-with Reference to Nagapattinam
District, Tamil Nadu Journal of Co-operation.
2. Aranganathan. T Sundar. K and Sathees
kumar. L (2008). Micro Credit and Rural
Development, Sabanayagam Publication,
Chidambaram.
3. Jamie Morgan and Wendy Olsen. (2011).
Aspiration Problems for the Indian rural Poor:
Research on SHGs and MF, Institute for
Development Policy and Management,
University of Manchester, pp 1-22.
4. Kayarkani. (2011). SHG Based Micro finance
on Women Development-an Empirical Study,
Self Journal of Social Science Volume. 2, No.
7.
5. Narayanan. B (2008). Micro credit in India-an
Overview, Micro Credit and Rural Development,
pp 21-26.
6. Narbada Ghimire. (2011). Micro finance as a
Policy Tool for Women Empowerment, Oregon
State University, pp 1-33.
7. Neeta Tapan. (2010). Micro Credit Self Help
Groups and Women Empowerment, New
Century Publication, New Delhi.
8. Paramasivan.C. (2012). Women Empowerment
Issue and Challenges, Regal Publications, New
Delhi.
9. Prasenjit Bujar Baruch. (2009). Self Help
Groups and Asset Creation: A Case Study of
Deharkuchi Gaon Panchayat of Nalbari District
Assam, Journal of the Centre for Micro Finance
Research, Volume. 1, No. 1, pp 183-194.
10. Saravanan. S (2008). Micro Finance and Rural
Development in Tamil Nadu, kissan world,
Volume.35,No.8, pp 9
11. Sudhansu kumar Das and Sanjay kavi Das.
(2011). Micro finance and India’s, Rural
Economy, New Century Publications, New
Delhi.
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