RBI 2005-06/60
RPCD.NO.SP.BC.17 /09.16.01/2005-06

July 14, 2005

The Chairman / Managing Director,
All Scheduled Commercial Banks
(Excluding RRBs)

Dear Sir,

Master Circular Priority Sector Lending- Special Programmes Swarna Jayanti Shahari Rozgar Yojana (SJSRY)

Please acknowledge receipt.

Yours faithfully,

Sd/-

(G.Srinivasan)
Chief General Manager

1.4 Among other components of the scheme, the following are the two components of Urban Self-Employment Programme (USEP) where credit from banks is involved:

i. Identification: A house-to-house survey for identification of genuine beneficiaries should be done. Non-economic parameters also should be applied to identify the urban poor in addition to the economic criteria of the urban poverty line. Community structures like Community Development Societies (CDS) should be involved in this task under the guidance of the Town Urban Poverty Eradication Cell (TUPEC)/Urban Local Bodies (ULBs).

ii. Eligibility: Under-employed and unemployed urban youth whose annual family income is below the poverty line and who have got education upto ninth standard shall be assisted with bank's loan and Government subsidy.

iii. Minimum/Maximum age limit: No age limit is prescribed.

iv. Definition of family: Identification of the family will have to be done on the basis of independent kitchen.

v. Coverage: SJSRY would be implemented in all areas falling under the jurisdiction of Urban Local bodies of any category, irrespective of population size.

vi. Project cost: Project cost upto Rs 50000/- is provided under the scheme in case of individual. If two or more eligible persons join together in a partnership, the project with higher costs would also be covered provided the share of each person in the project cost is Rs 50 000/- or less.

vii. Subsidy: Subsidy would be provided at the rate of 15% of the project cost, subject to a ceiling of Rs. 7500/- per beneficiary (for individual USEP). In case of more than one beneficiary join together and set a project under partnership, subsidy would be calculated for each partner separately at the rate of 15% of his share in the project cost limited to Rs 7500/- per partner.

viii. Margin money: The borrower has to bring in 5 per cent of the project cost as margin money. Partnerships would be permitted wherein the overall project cost will be a simple sum of individual project cost allowable per borrower. Such project would be eligible for subsidy equal to the total permitted subsidy per person and each member would have to bring in 5 percent of his share of project cost as margin money.

ix. Repayment: Repayment schedule ranges from 3 to 7 years, after initial moratorium of 6 to 18 months, as decided by the bank.

x. Physical targets: Physical targets under the USEP of SJSRY will be decided by the State Governments in conformity with the guidelines of the scheme as also the result of beneficiary survey to ensure adequate flexibility of operation of the scheme.

2. Instructions and Guidelines
2.1 Sub-targets: The percentage of women beneficiaries under the SJSRY Scheme shall not be less than 30 percent. SCs/STs must be benefited to the extent of the proportion of their strength in the local population. A special provision of 3 percent shall be made for the disabled under the scheme.
2.2 Priority Sector Status: The loans granted under the scheme should be treated as advances under priority sector and accordingly the loan applications should be disposed of expeditiously within the time schedule prescribed in this regard i.e. applications for loans upto Rs. 25,000/- within a fortnight and those for credit limits above Rs. 25,000/-, within 8 to 9 weeks.
2.3 No Dues Certificate: The loan applications may contain a clause for eliciting particulars about any loan taken by the applicant from any banking / financial institution of the State / Central Government and repayment particulars and balance outstanding in case such a facility is availed of. All particulars furnished by the applicant in the application may be certified by him. Based on the information furnished by the applicant, the banks may consider dispensing with production of 'No Due Certificate' as a compulsory requirement, if they are satisfied about the status of the borrower, so that the delay in sanction and disbursement of loans could be avoided. In case the bank concerned decides to verify the status of the loan account of the borrower with other banks in the area, it should send specific communication enclosing the list of applicants in duplicate and requesting the other banks to send back the duplicate copy duly certified. The banks receiving the reference for verification should furnish the same or provide details of its dues within a maximum period of 10 days. If no response is received within 15 days of request of verification from any bank, it may be presumed that the referred bank has no dues. Further, as inter-bank exchange of information is on the basis of mutuality and reciprocity, service charges should not be an issue for furnishing 'No due Certificate'.
2.4 Rejection of applications - Branch Managers may reject applications (except in respect of SC/ST) and such cases of rejections are to be verified subsequently by the Divisional / Regional Managers. In case of proposals from SCs/STs, rejection should be at a level higher than that of a branch manager. Further, rejection of applications should not be on flimsy grounds. The reasons of rejection may also be communicated to the sponsoring agency while returning the applications.
2.5 Security: An entrepreneur eligible for assistance under the self-employment scheme can take a composite loan upto Rs. 50,000/- and group loans upto Rs.3.00 lakhs which would not require a collateral/guarantee. Besides margin, as also the subsidy by the Government, the borrower would hypothecate/mortgage/pledge to the bank the assets created out of bank loan.
2.6 Training: The entrepreneurs selected under the scheme would be provided training and other entrepreneurial development assistance by Government. Training is a compulsory input before disbursement of the loan under the scheme. This requirement may be waived if a borrower has already received the training from a registered NGO/VO or has learnt the activity such as cobblery, carpentry etc., or learnt the trade as an apprentice from Private/Public registered Body and requisite certificate to that effect is produced from the ULB or the private/public registered company as the case may be. However, training may not be insisted upon as a pre-condition for sanctioning of loan in respect of activities not requiring special skill.
2.7 Rate of Interest: Loans under the scheme will carry interest as per the directives on interest rates issued by Reserve Bank of India from time to time.
2.8 Defaulter: A defaulter to a bank/financial institution will not be eligible for assistance under the scheme.
2.9 Opening of Savings Bank Accounts by SHGs: Self-Help Groups (SHGs) are eligible to open Savings Bank Accounts as per the instructions contained in Circular DBOD.No.DIR.BC.11/13.01.08/98 dated 10th February, 1998.

3.2 It should be noted that the subsidy under USEP/DWCUA component of SJSRY is to be treated as back-ended subsidy with lock-in-period of two years. The subsidy amount may be utilized / adjusted towards repayment of the loan at the time of maturity. The subsidy admissible to the borrower should be kept in the Subsidy Reserve Fund Account borrower-wise, instead of in term-deposit in the name of borrower. Further it has been decided that no interest will be paid on the subsidy amount held by the banks and for the purpose of charging interest on loan amount the subsidy amount would be excluded therefrom.

3.4 As regards the treatment to be given to the subsidy portion, held back-ended, when the loan under SJSRY becomes bad / doubtful / long over due for repayment, it is clarified that the amount of subsidy may be adjusted against the defaulted loan only at the end of the transaction at the time of closure of the loan provided that

1. The subsidy amount received from the Central Government by each state level nodal agency/SUDA to be supplemented with the matching subsidy components from the State Government will be broadly distributed to the district level agencies/District Urban Development Agency (DUDA), in proportion to their population.

2. District Level Agency/DUDA will thereafter distribute the total subsidy amount amongst various Urban Local Bodies in the district in proportion to the population catered to by each Urban Local Body.

3. After Urban Local Body-wise allocation of subsidy for both the components is decided, the Urban Local Bodies shall open savings bank accounts captioned as under to which the allocated subsidy shall be credited:

(i) '(Mention the name of the Urban Local Body) Account - SJSRY - Subsidy for Urban Self Employment through setting up Micro Enterprises and Skill Development under Urban Self employment Programme (USEP).'

(ii) '(Mention the name of the Urban Local Body) Account - SJSRY - Subsidy for Development of Women and Children in Urban Areas (DWCUA), under Urban Self Employment Programme (USEP)'.

4. Instructions regarding debits to be raised against the above mentioned accounts may be signed jointly by the Chairman of the Urban Local Body and

its Chief Executive Officer. In case of a superseded Urban Local Body, the account may be operated by the Administrator/OSD/CEO of the Urban Local Body and one other officer.

5. The subsidy amount credited to the above mentioned accounts shall be released by the concerned banks along with the loan amounts. As such, no chequebook would be required to be issued to the Urban Local Bodies. The district Level Nodal Agency/DUDA may issue suitable instructions to the Managers of the various banks in the district, holding the above-mentioned accounts that no chequebooks are to be issued with reference to such accounts.

6. The banks in which the above-mentioned accounts are opened can be nationalised banks or scheduled banks.

7. Instructions relating to opening/operating of bank accounts are irrevocable and may not be altered/modified/changed/cancelled/withdrawn without written consent of Ministry of Urban Employment and Poverty Alleviation.