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Q74 (IAS/2023) Economy › Schemes, Inclusion & Social Sector › Financial sector schemes Official Key

Consider the following statements : 1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived. 2. In an SHG, all members of a group take responsibility for a loan that an individual member takes. 3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs. How many of the above statements are correct?

Result
Your answer: —  ·  Correct: B
Explanation

The correct answer is Option 2 (Only two) because statements 2 and 3 are correct, while statement 1 is incorrect.

  • Statement 1 is incorrect: The SHG-Bank Linkage Project was not initiated by the State Bank of India. It was launched by NABARD in 1992, following the success of the MYRADA project, to provide formal financial services to the unbanked poor.
  • Statement 2 is correct: SHGs operate on the principle of joint liability. While the loan is often given to an individual member for their specific needs, the entire group remains collectively responsible for its repayment. This peer pressure ensures high recovery rates and serves as social collateral.
  • Statement 3 is correct: The SHG-Bank Linkage Programme is supported by a wide network of financial institutions, including Commercial Banks, Regional Rural Banks (RRBs), and Cooperative Banks, which provide credit and savings facilities to these groups.
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements : 1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by provid…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 6.7/10 · 3.3/10
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This is a classic 'NCERT + Institutional History' mix. Statements 2 and 3 are foundational concepts found directly in Class X NCERT. Statement 1 is a standard 'Agency Swap' trap (swapping NABARD with SBI). If you mastered the NCERT basics and knew the 'father' of rural credit (NABARD), this was a sitter.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Was the Self-Help Group (SHG) programme in India originally initiated by the State Bank of India (SBI) to provide microcredit to the financially deprived?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"3. Credit Off Take Through Microfinance 3.1 Self-Help Group-Bank Linkage Programme The SHG-BLP, initiated by NABARD as a pilot project in 1992, was initially driven by NGOs."
Why this source?
  • Explicitly states which institution initiated the SHG-BLP and when, naming NABARD as the initiator.
  • Directly contradicts the claim that SBI originally initiated the programme by attributing initiation to NABARD in 1992.
Web source
Presence: 5/5
"In order to link the unorganized with the formal financial sector in India, the National Bank for Agriculture and Rural Development (NABARD) introduced the Self-Help Group Bank Linkage Programme (SHG-BLP) as a trial initiative in 1992 and mainstreamed it in 1996."
Why this source?
  • States NABARD introduced the Self-Help Group Bank Linkage Programme as a trial initiative in 1992 and mainstreamed it in 1996.
  • Shows the programme linkage was driven by NABARD (not SBI), providing clear attribution of origin.

Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > 50 UNDERSTANDING ECONOMIC DEVELOPMENT > p. 50
Strength: 5/5
“their earlier loans. However, the moneylenders charge very high rates of interest, keep no records of the transactions and harass the poor borrowers. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self Help Groups (SHGs) and pool (collect) their savings. A typical SHG has 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. Saving per member varies from Rs 25 to Rs 100 or more, depending on the ability of the people to save. Members can take small loans from the group itself to meet their needs.”
Why relevant

Describes the SHG model (women organising, pooling savings, small loans from the group) and frames SHGs as a distinct, community-led mechanism for lending to the poor.

How to extend

A student could use this to check whether SHGs were an internal SBI product or arose as a grassroots/community-driven model later supported by banks like SBI.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > 7.20 Indian Economy > p. 176
Strength: 3/5
“• In 1960, the SBI acquired control of seven regional banks of former Indian Princely States and they were renamed as State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Saurashtra, State Bank of Patiala and State Bank of Travancore. • All of them, along with Bharatiya Mahila Bank, had been gradually merged with SBI. ö. • State Bank of Saurashtra in 2008 and State Bank of Indore in 2010 merged with SBI.”
Why relevant

Explains SBI's historical expansion by taking over regional/state banks, indicating SBI's growing institutional footprint in rural/regional banking.

How to extend

One could correlate SBI's enlarged rural presence with the plausibility of SBI initiating rural credit programmes, then seek chronological evidence whether SHGs predate or postdate that expansion.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.1 History of Indian Banking and Reforms > p. 125
Strength: 4/5
“Despite the progress in 1950s and 1960s, it was felt that the creation of SBI was not far reaching enough since the banking needs of small-scale industries and the agricultural structure was still not covered sufficiently. This was partially due to the existing close ties commercial and industry houses maintained with the established commercial banks, which give them an advantage in obtaining credit. Additionally, there was a perception that banks should play a more prominent role in India's development strategy by mobilizing resources for sectors that were seen as crucial for economic expansion. As a result, the policy of social control over banks was announced.”
Why relevant

Notes that even after SBI's creation, banking needs of small-scale/agriculture were insufficiently covered and that policy sought greater bank involvement in development.

How to extend

A student could infer that central policy pushed banks to support rural credit, so if SHGs originated as a response to unmet rural credit needs, their origin might be linked to broader policy rather than a single bank.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 8: Financial Market > M India's Efforts for Financial Inclusion > p. 239
Strength: 4/5
“Successive Indian governments have taken a lot of initiatives since 1950s to encourage financial inclusion. In 1956, the nationalisation of life insurance companies was done. The general insurance companies were nationalised in 1972. Nationalisation of banks was done in 1969 and 1980 to give impetus to financial inclusion. As another measure to promote financial inclusion, Lead Bank Scheme was introduced in 1969 by assigning lead roles to individual banks (both in public sector and private sector) for a particular district. A bank having a relatively large network of branches in the rural areas of the given district are generally entrusted with the Lead Bank responsibility for that district.”
Why relevant

Describes the Lead Bank Scheme (assigning banks responsibilities for districts) as a formal mechanism for banks to promote financial inclusion at local level.

How to extend

One could use this to assess whether SHG promotion was likely to be a government-led/district-level bank action (e.g., under Lead Bank responsibilities) rather than a sole SBI initiative.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Small Industries Development Bank of India > p. 182
Strength: 3/5
“Small Industries Development Bank of India (SIDBI) was set up in 1990 as an independent financial institution aimed to aid the growth and development of Micro, Small and Medium scale Enterprises (MSMEs) in India. It was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India (IDBI). Currently, the ownership is held by GOI and many other GOI-owned/controlled institutions. Beginning as a refinancing agency to banks and State-level financial institutions for their credit to small industries, it has expanded its activities including direct credit to the SMEs. SIDBI is headquartered in Lucknow. In order to promote and develop the MSME sector, SIDBI adopts a 'Credit+' approach under which, besides credit, it supports enterprise development, skill upgradation, marketing cluster development, technology modernisation, etc., through its promotional and developmental support to MSMEs.”
Why relevant

Describes SIDBI (established 1990) as a specialised institution supporting micro/SME credit and promotional activities beyond just lending.

How to extend

A student might check timelines and roles: if SIDBI or similar institutions promoted SHGs or microcredit around 1990s, it weakens the claim that SHGs were originally an SBI initiative.

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Statement analysis

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