APGVB ‘Suvidha Vikas’ boon for poor borrowers

Andhra Pradesh Grameena Vikas Bank (APGVB), a government owned bank has a debt swapping scheme called ‘Suvidha Vikas’ for poor people in Warangal. But poor borrowers do not have awareness about the scheme due to which it has remained under utilized by these borrowers who go to private micro-finance institutions (MFIs) for help.

Although loan borrowers go to MFIs for help, the borrowers of Warangal unit of APGVB are in safe hands.

Suvidha Vikas’ loan book show loan of up to Rs 5 lakh given to self-help groups (SHG) (without any security) and monthly installment repayment, as against the weekly installment system followed by private MFIs.

Except for Chennaraopet, Gudur, Tadwai, Dornakal and Cheriyal mandals, the scheme is doing well in rest of the 45 mandals of Warangal.

Moreover, besides Warangal, the APGVB scheme is running in four other Telangana districts of Medak, Mahbubnagar, Nalgonda and Khammam and three more districts in Andhra.

The sources informed, APGVB Warangal is providing services to members of 14,590 SHGs under Suvidha Vikas, each group having an average 12 members. M. Balathimma Reddy, manager (advances), APGVB, Warangal, who looks after Suvidha Vikas said, “In the last two months, we have seen a sudden rise with 192 new SHGs, who constitute the majority of loan borrowers from private MFIs, being added in Warangal.”

Although APGVB officials are not able to market their loans efficiently as the agents employed by private MFIs do through sweet-talk, but APGVB charge low interest on loans as compared to what is charged by private MFIs.

Mr Reddy said, “As against the high rate of interest charged by MFIs, we charge only 14 per cent interest rate. Of this, the state government pays on 5 per cent interest rate as subsidy under Pavala Vaddi scheme to the poor borrowers.”

According to sources, there is a major drawback with Suvidha Vikas scheme, that it does not completely takeover loans of borrowers from private MFIs instead it only provided the SHG another loan to pay-off the first loan.

A. Vinayak Reddy, professor of Economics, Kakatiya University said, “As of now, Reserve Bank of India has not given permission to public sector banks (PSUs) to take over loans from MFIs.” Mr Reddy further said as the state government provides support for the setting up of SHGs, so it becomes the primary responsibility of the government to provide them loans when they require.