S.K. Kalia Committee

RBI in November 1994 constituted a working Group comprising eminent NGO functionaries, academicians, consultants and bankers under the Chairmanship of Shri S.K. Kalia, the then Managing Director, NABARD to study the functioning of SHGs and NGOs for expanding their activities and deepening their role in rural development.

The Working Group held the following view-

• The linking of SHGs with the banks is a cost effective, transparent and flexible approach to improve the accessibility of credit from the formal banking system to the rural poor.
• SHGs can offer much needed solution to the twin problems being faced by the banks, viz recovery of loans in the rural areas and the high transaction cost in dealing with small borrowers at frequent intervals.

Thus, the Group recommended encouraging the formation of SHGs and their linking with the banks. Further it suggested banks to treat the linkage program as a business opportunity and design area specific and group specific loan packages taking into account inter alia the potential, local needs, available talent/skills etc.

Based on the recommendations, efforts were made to make the SHG movement efficient and effective.