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Loan Repayment Dynamics of Self-help Groups in India

Author

Listed:
  • Silu Muduli

    (Silu Muduli (corresponding author) is with the Department of Economic and Policy Research, Reserve Bank of India, Mumbai, Maharashtra, India.)

  • Manu Sharma

    (Manu Sharma is with the Department of Economic and Policy Research, Reserve Bank of India, Mumbai, Maharashtra, India. E-mail: manusharma@rbi.org.in)

Abstract

The overall ratio of non-performing assets (NPAs) to total advances (the NPA ratio) extended to self-help groups (SHGs) has historically remained below 8 per cent in India. However, in the central, northern, and north-eastern regions of India, this ratio is relatively high and has remained above 15 per cent since 2015–2016. Using state-level data, the study identifies SHG-specific and state-specific factors that might be responsible for higher NPAs ratios. It also examines whether higher NPAs constrain access to future credit. Spatial analysis confirms the existence of geographical clustering of NPAs in the northern and central regions of the country. SHGs with lower outstanding loans and lower savings are more likely to default, the relationship being stronger in states with higher NPAs. The article finds that states with higher SHGs densities, per capita incomes, and road and railway connectivity, and lower infant mortality rates have lower NPAs in their SHGs. SHGs with lower savings and higher NPAs operating in states with lower per capita incomes and banking penetration face difficulties accessing fresh credits. JEL Codes: G21 , O18, R51

Suggested Citation

  • Silu Muduli & Manu Sharma, 2022. "Loan Repayment Dynamics of Self-help Groups in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 16(2), pages 183-202, May.
    • Handle: RePEc:sae:mareco:v:16:y:2022:i:2:p:183-202
    DOI: 10.1177/09738010221074593
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    1. Deepika Kumari & Aditya Mohanty, 2023. "Livelihood Grants and the Case of Ultra-Poor Women Households in Bihar, India," Indian Journal of Human Development, , vol. 17(3), pages 530-542, December.

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    More about this item

    Keywords

    Self-help groups; Non-performing assets; Bank credit;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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