In this episode of RBI Talks – From Paisa to Policy, host Shibi speaks with Dr. Ashish Srivastava, who has been closely involved in policymaking around financial inclusion, about how Self-Help Groups (SHGs) and microfinance have transformed the lives of women — especially in rural India.
"Give a woman some money, and she'll put it to good use. Teach her about money, and she can change the world."
This idea sets the tone for the conversation: small savings, collective strength, and the spirit of working together have made rural women powerful agents of economic and social change.
What Exactly Is a Self-Help Group?
A Self-Help Group is, as the name suggests, about helping yourself. It's a small group — typically 10 to 20 people — who come together, formally or informally, with no fixed structure required. Members pool small savings and often run small businesses together, helping with day-to-day livelihood needs. The core purpose is participation in the formal financial system, which directly supports India's broader need of financial inclusion — something RBI, the government, and other institutions work toward together.
A Quiet Revolution
Today, close to 18 crore families across India are connected to Self-Help Groups. Through small-scale enterprises, these groups have helped families improve their standard of living while contributing to the country's economic and social development — and to what's often called "women's agency" in the broader economic and social landscape. Wherever women's participation in society grows and their financial empowerment deepens, both society and the economy benefit.
Think about it: a woman in a village who was once limited to her household is now running her own business — all because of collective strength and the habit of saving together.
The Role of RBI, Banks, and Microfinance Institutions
The whole ecosystem is built around the need of financial inclusion — connecting everyone to the banking system and making sure no one is left behind. As the regulator, RBI has directed banks to open savings accounts for these Self-Help Groups, under what's known as the SHG Bank Linkage Programme — a programme in which NABARD has also played a major role.
These savings accounts can be opened with minimal formalities. Since a group might have 10 to 20 members, it isn't necessary for every single member to complete KYC (Know Your Customer) verification — only the group's office bearers, typically two to four people, need to. Once the account is open, the group can begin saving, building a shared fund. From there, members can lend to each other internally, and eventually, banks extend formal credit on top of these savings accounts — this is called credit linkage.
The approach RBI has encouraged is: first establish the savings linkage, then build toward credit linkage. Loan amounts are typically extended in proportion to a group's savings — often up to four times the group's savings — and established, mature groups may receive even more, giving banks flexibility to support credit linkage. The need is to help SHGs move beyond being purely community-level efforts and become a true part of the formal financial system.
The Numbers Behind the Movement
Roughly 1.4 crore Self-Help Groups in India have been savings-linked with banks, and a large share of members have built up savings — totalling close to ₹65,000 crore held in SHG accounts. Of these, around 77 lakh SHGs have received credit linkage, with nearly ₹2.5 lakh crore currently outstanding in their accounts.
Lending to SHGs and their members also falls under RBI's Priority Sector Lending guidelines, which require banks to direct a specified portion of lending toward crucial but underserved sections of society — agriculture, MSMEs, and women borrowers among them. Government schemes have also played a major role in expanding credit access for SHGs — for instance, under the Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM), roughly 80% of credit-linked SHGs are associated with the mission.
The Role of Microfinance Institutions
Around 80–85% of Self-Help Groups are run exclusively by women. Microfinance institutions complement this ecosystem by extending small loans to meet various needs — consumer finance or personal credit, for example. A key feature of RBI's microfinance guidelines is that any household with an annual income of up to ₹3 lakh can access these loans without needing any collateral, security, or mortgaged property. More than 8 crore people in India currently borrow through microfinance institutions — a meaningful share when measured against the total number of households in the country.
Are Unsecured Loans Risky? How Borrowers Are Protected
Since microfinance loans are largely unsecured — appropriate for low-income households that can't easily offer security or mortgage property — RBI has built in several borrower protections. Lenders are required to clearly and transparently explain all loan terms through a Key Fact Statement: the applicable interest rate, the repayment schedule, and how the loan will be monitored.
One of the most important protections: regardless of whether repayments are made monthly, weekly, or fortnightly, total annual repayment obligations cannot exceed 50% of a household's annual income (capped, in this conversation, with reference to the ₹3 lakh household income threshold — meaning repayments can't exceed roughly ₹1.5 lakh a year). This exists for a simple reason: if all of a household's income went toward loan repayment, the family would have nothing left to live on.
Self-Regulatory Organisations (SROs) operating in this space also monitor their member institutions to help prevent undue risk and ensure maximum benefit reaches borrowers. On top of these protections, loans have become significantly more accessible — door-step delivery and collection are now common, and digital channels have made disbursement and collection even more convenient.
Real Stories of Impact
There are countless examples of SHGs transforming rural communities. Kudumbashree in Kerala is one of the most well-known — a community-level federated structure of SHGs that has brought together large numbers of women, helping them run small businesses, improve their standard of living, contribute to the economy, and even participate in local self-governance. It's described as a step-by-step ladder: as people are gradually empowered, their capability and confidence grow, and their participation deepens — exactly what financial inclusion aims to achieve.
Other examples include the handcrafted embroidery work of SHG women in Karnataka (known as Lambani embroidery), and the revival of Udupi sarees through SHG efforts. Examples like these can be found across the country, from north to south, east to west.
Busting the Myth: SHGs Aren't Just for Rural Women
There's a common assumption that SHGs exist only in rural areas, or that only women can form them. Neither is true. There's no gender-based restriction on forming a Self-Help Group — men can form them too. However, women have overwhelmingly led participation, which is why 80–85% of SHGs are run by women. SHGs also exist in semi-urban and urban areas, though the need and scope for them tends to be greater in rural settings.
Women's Broader Role in Financial Inclusion
Women's contribution to financial inclusion extends well beyond SHGs. India now has close to 56 crore Jan Dhan accounts, holding more than ₹2.5 lakh crore in deposits. While a 50-50 gender split might be expected, the reality is even more striking: roughly 56% of Jan Dhan accounts belong to women, with a substantial share of savings held in those accounts. Notably, around two-thirds of these Jan Dhan accounts are in semi-urban and rural areas — underscoring how central women have been to India's financial inclusion journey, both empowering themselves and helping transform the broader economic and social landscape.
The Takeaway
Self-help and institutional support, working in harmony, can genuinely improve people's standard of living and drive the country's economic progress. Just as a study group helps students learn better by coming together, the collective effort of SHGs — backed by institutional support from banks, NABARD, and RBI — has made strong progress toward India's financial inclusion needs and broader economic and social development.
Three things can change anyone's life: small savings, collective strength, and financial independence. If there's a woman in your family, among your friends, or in your neighbourhood who wants to become financially independent, please guide and support her.
Best regards,
Written By Samyak Naik
