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The second error of judgment was when I as MD agreed that
NABARD could provide grant support for formation of SHGs, as
an add on activity, to even those NGOs which were primarily
involved in various rural development programmes such as
health, education, environment, woman empowerment, etc.,
but were willing to form SHGs. The strategy was to increase our
partner NGOs and reach every nook and corner of the country
which we were not able to reach and the SBLP numbers were
heavily biased in favour of Southern India from the beginning
and in the process also reach the million mark.
This was an error of judgment as these NGOs were not deeply
involved in developing sustainable financial inclusion and would
only form the SHGs or at best link themwith banks. The long term
interest or expertise in financial matters of self-managed SHG
system was not there. The quality of SHGs formed by these NGOs
was very poor and the SHPI did not oversee them once the credit
linkage was achieved. Round about the same time, different
departments of the State Government also started formation of
SHGs as a delivery mechanism for their programmes. Many of the
SHGs got credit linked to banks over time under target approach
which ultimately led to fall in recoveries and increase in NPAs.
I feel another error of judgment was on the part of RBI when RBI
agreed to mainstream SBLP without any revised guidelines. The
pilot project guidelines remained unchanged. Actually at the
time of mainstreaming, a careful thought should have been given
to the role of Federations in SBLP. Frankly, we cannot blame the
RBI as the mainstreaming was based on the recommendation
of Shri S K Kalia (the then MD of NABARD) Committee Report.
My idea is to publicly own my mistake concerning SBLP and
apologize. However, inspite of my errors of judgment, the
SBLP has done exceptionally well and according to NABARD
has successfully provided access to self-managed, door step
financial services to over half of the rural households in India.
But if I had been more careful and had avoided these errors of
judgment perhaps the SBLP would have done even better and
the programme would have proved to be more sustainable and
an effective supplementary channel for provision of financial
services to the asset-less poor, who even today are bypassed by
the formal banking system. The stagnation which we now observe
in SBLP perhaps would not have happened, even if the number
of poor families covered by SHGs would have been smaller, the
system could have been better structured to serve the poor in a
sustainable manner and provide door step financial services to
them in a manner best suited for their requirements.
