JAIIB PPB Paper-2 Module-B Unit 19: Government Sponsored Schemes

JAIIB Paper 2 (PPB) Module B Unit 19: Government Sponsored Schemes (New Syllabus) 

The IIBF has recently announced updates to the JAIIB Exam 2023, including changes to the syllabus and exam format. Candidates will now be required to complete four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 19: Government Sponsored Schemes. This unit is particularly crucial for candidates, as it will significantly impact their performance in the exam.

To assist candidates in understanding the topic, we will provide all the necessary details related to Unit 19: Government Sponsored Schemes of JAIIB Paper 2 (PPB) Module B: Functions of Banks. We strongly recommend that candidates refer to this article and utilize our Online Mock Test Series to enhance their understanding of Foreign Currency Accounts for Residents and other related aspects.

Candidates must comprehend each unit in the syllabus, including the Marketing unit, to excel in the JAIIB Certification Examination 2023 and establish a successful career in the banking sector. This unit is of great importance in the banking industry, and candidates must prepare thoroughly.

Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (Day–NRLM)

  • National Rural Livelihoods Mission (NRLM) replaced the Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme, which was renamed as Deendayal Antyodaya Yojana – National Livelihoods Mission (DAYNRLM) with effect from March 29, 2016.
  • Universal Social Mobilization: Initially at least one member from each identified rural poor household, preferably a woman, is brought under the Self Help Group (SHG) network in a time bound manner. Subsequently, both women and men would be organized. The composition of beneficiaries is – 50% SC/STs, 15% minorities, and 3% persons with disability.
  • Participatory Identification of Poor (PIP): Target groups include all the needy poor identified as households with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC). Also, participation of the poor in the process of identifying the target group is adopted.
  • Promotion of Institutions of the Poor
  • Strengthening Existing SHGs and Federations
  • Training, Capacity building and Skill building
  • Revolving Fund and Community Investment Support Fund (C.I.F)
  • Achieve universal financial inclusion, beyond basic banking services to all the poor households, SHGs and their federations.
  • provision for subvention on interest rate above 7% per annum on loans availed from mainstream financial institutions.
  • Intensive blocks: These would have access to a full complement of trained professional staff and cover a whole range of activities of universal and intense social and financial inclusion, livelihoods, partnerships etc.

Lending Norms for SHG and Individual SHG Members

Purpose of Loan and Repayment

  • The loan amount is distributed among members based on the Micro Credit Plan (MCP) prepared by the SHGs. Major portion of the loan as indicated below to be used for income generating productive purposes.

Repayment

Security And Margin

  • Upto Rs. 10.00 lakh limit: No collateral and no margin should be obtained. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon.
  • Above Rs. 10 lakh and up to Rs. 20 lakh: No collateral should be obtained and no lien should be marked against savings bank account of SHGs. The entire loan would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).

Willful defaulters: 

  • Are not to be financed under DAY-NRLM. Banks should not deny loan to entire SHG on the pretext that certain member(s).

Recovery of Loans

  • Banks shall take all possible measures, i.e. personal contact, organization of joint recovery camps with District Mission Management Units (DPMUs) to ensure the recovery of loans.
  • List of defaulting SHGs should be furnished to BLCC/ DCC and discussed in the meetings every month.

Interest Subvention Scheme for Women SHG

For select 250 Districts:

  • All women SHGs are eligible for Interest subvention on credit up to Rs. 3 lakh.
  • The commercial banks would lend to women SHGs in rural areas @ 7% per annum up to agg. Rs. 300,000/-
  • Banks would be sub vented for difference between the Weighted Average Interest Charged (WAIC) and 7% subject to maximum 5.5%, if they provide credit to SHG at 7% p.a..
  • SHGs would be provided additional 3% subvention on prompt repayment of loans.

For Category II Districts (other than select 250 Districts):

  • Banks may charge the SHGs as per their respective lending norms and the difference between the lending rates and 7% subject to a maximum limit of 5.5% is subvented directly in the loan accounts of the SHGs by the SRLMs.
  • Women SHGs from rural areas under DAY- NRLM would be eligible for interest subvention on credit upto Rs. 3 lakh at the rate of 7% per annum on prompt repayment. The difference amount between the lending Rate of the banks and 7% (subject to a maximum limit of 5.5%) will be remitted on a monthly/ quarterly basis by the SRLMs, directly to the loan accounts of the SHGs who have repaid promptly.

Deendayal Antyodaya Yojana – National Urban Livelihoods Mission (Day–NULM)

  • Swarna Jayanti Shahari Rozgar Yojana (SJSRY) was replaced by National Urban Livelihoods Mission (NULM), and renamed as “Deendayal Antyodaya Yojana – National Urban Livelihoods Mission (DAYNULM)” in February 2016.

The NULM has following components:

  • Social Mobilisation and Institution Development (SM&ID) Programmes for SHGs and their Federations
  • Capacity Building and Training (CB&T)
  • Employment through Skills Training and Placement (EST&P)
  • Self-Employment Programme (SEP)
  • Support to Urban Street Vendors

Financial Assistance:

  • Interest subsidy, over and above 7% rate of interest is given in case of timely repayment of loan.
  • Additional 3% interest subvention is provided to all Women Self Help Groups (WSHGs) who repay their loan in time.

Individual Enterprises (SEP-I) – Loan & Subsidy

  • Age: The beneficiary should be at least of 18 years.
  • Project Cost (PC): Maximum unit Project Cost should be Rs. 2,00,000.
  • Collateral Guarantee on Bank Loan: No collateral is required. and banks avail guarantee from CGTMSE
  • Repayment: Over 5 to 7 Years after initial moratorium of 6-18 months.
  • Margin Money: No margin for loans up to Rs. 50,000; and for higher amount preferably 5%, and in no case more than 10% of the project cost.
  • Type of Loan Facility: Term Loan – for capital expenditure; and Cash Credit – for working capitals. Composite Loans consisting of both components.

Group Enterprises (SEP-G) – Loan & Subsidy

  • Eligibility Criteria: Group enterprises should have minimum 3 members with at least 70% from urban poor families, and not more than one person from the same family.
  • Age: At least 18 years, if applying for bank loan.
  • Maximum Loan: Maximum Rs. 2 Lakh per member or aggregate Rs. 10 Lakh, whichever is lower.
  • Mode of Loan: Single loan to the group, or to each member up to Rs. 2 lakh, with cap of Rs. 10 lakh.
  • Type of Loan Facility: Term Loan – for capital expenditure. Cash Credit – for working capital.
  • Loan and Margin Money: No margin money for loan up to Rs. 50,000, and for higher amount preferably 5%, but not more than 10% of the project cost.
  • Collateral/ Guarantee on Bank Loan: No collateral or guarantee is required. Guarantee cover from CGTMSE or any other fund.
  • Repayment: Over 5 to 7 years after initial moratorium of 6-18 months.

Credit Card for Enterprise Development

  • The individual entrepreneurs needs immediate and short term cash for meeting expenses. To support for such credit needs, DAYNULM facilitates access to Credit Cards or MUDRA Card through banks.
  • The SULM in consultation with the SLBC finalizes the norms, limits and specifications for issuance of Credit Card or MUDRA Card to the individual entrepreneurs.

Technology, Marketing and Other Support

  • The City Livelihoods Centers (CLCs) established under DAY-NULM offer services such as for establishment, production, procurement, technology, processing, marketing, sales, packaging, accounting, etc. for long term sustainability.

Pradhan Mantri Jan Dhan Yojana

The Scheme envisages a savings bank account for each adult, linked with other benefits. Persons without an OVD could open a ‘Small Account’. The benefits are:

  • No minimum balance required.
  • RuPay Debit card provided.
  • Accident Insurance Cover of Rs.1 lakh (Rs. 2 lakh to accounts opened after 28.8.2018) available with RuPay card.
  • Life insurance cover of Rs. 30,000/- of the account holder with RuPay debit card.
  • Easy Transfer of money across India
  • Beneficiaries of Government Schemes get DBT.
  • After satisfactory operation of the account for 6 months, overdraft facility.
  • Eligible for PMJJBY, PMSBY, APY, MUDRA scheme.

Overdraft Facility in PMJDY Accounts:

Eligibility criteria of PMJDY account holders are:

  • BSBD accounts operated satisfactorily for at least six months
  • OD granted to the earning member, preferably a woman of the family.
  • Regular credits under DBT/ DBTL scheme/other verifiable sources.
  • Account should be seeded with Aadhaar for avoiding duplicate benefit.
  • Account holder should not have any other SB account with any bank.
  • Age of applicant – between 18 years to 65 years.

Note: This facility is not available to minors, holders of KCC/ GCC, and more than one family member.

Period of Sanction:  36 Months subject to annual review of account.

Loan amount: Lower of the 4 times of average monthly balance or 50% of credit summations during the preceding 6 months, subject to maximum Rs. 10,000/-

Interest rate: Not exceeding 2% above base rate.

Other Conditions: No processing fee can be charged for this facility.

Operational Aspects: SBOD account will be primary account to receive all subsidies/ benefits. NPCI repository of Aadhaar Seeding for banks to verify any earlier seeding. Mobile Number of the borrower/ family to be on record.

Pradhan Mantri Suraksha Bima Yojana

  • The Scheme is available to people in the age group 18 to 70 years with a bank account who give their consent to join/ enable auto-debit on or before 31st May for the coverage period 1st June to 31st May, on an annual renewal basis.
  • The risk coverage under the scheme is Rs. 2 lakh for accidental death and full disability and Rs. 1 lakh for partial disability. The premium of Rs. 20 per annum is to be deducted from the account holder’s bank account through ‘auto-debit’ facility in one installment.

Atal Pension Yojana

  • The Atal Pension Yojana (APY) was launched on 09.05.2015 to create a universal social security system for all Indians, especially the poor, the under-privileged and the workers in the un-organised sector. APY is administered by Pension Fund Regulatory and Development Authority (PFRDA).
  • APY is open to all bank account holders in the age group of 18 to 40 years. From 1st October,2022 onwards, any citizen who is or has been an income-tax payer, shall not be eligible to join
  • Subscribers would receive the guaranteed minimum monthly pension of Rs. 1000 or Rs. 2000 or Rs. 3000 or Rs. 4000 or Rs. 5000 at the age of 60 years.
  • The monthly pension would be available to the subscriber, and after him to his spouse and after their death, the pension corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of subscriber.

Mudra Loans

In April 2015, Micro Units Development & Refinance Agency Ltd (MUDRA) was set up. Pradhan Mantri Mudra Yojana (PMMY) was launched, with MUDRA as administering agency.

MUDRA has three schemes for providing assistance at different stages: 

  • Shishu: Covering loans upto Rs. 50,000/-
  • Kishor: Covering loans above Rs. 50,000/- and upto Rs. 5 lakh
  • Tarun: Covering loans above Rs. 5 lakh to Rs. 10 lakh.

Purpose:

  • The loan is provided for income generating activities and not for consumption/personal needs. The extent of loan is based on the Project cost and the investment proposed.
  • For working capital purposes ‘MUDRA ’card (a RuPay debit card) has also been launched.

Interest rate & Processing Fees:

  • Interest can be charged as per the bank’s policy. In case of refinance the rates will be as advised by MUDRA.
  • Banks may charge processing fee but for Shishu Loans most banks have waived these.

Security: 

  • First charge on all assets financed, and other assets directly associated with the business financed.
  • Cover under CGFMU of CGTMSE. No collateral security to be obtained, in terms of RBI guidelines.

Repayment/Tenor of Loan: 

  • The period of loan is based on the economic life of the assets created and also the cash flow generated. The refinance assistance from MUDRA is for maximum 36 months.

Khadi Village Industries Commission

The Khadi and Village Industries Commission (KVIC) is a statutory body. In April 1957, it took over the work of former All India Khadi and Village Industries Board.

Its Functions are as follows:

  • Programs for development of Khadi and other village industries in rural areas.
  • Building up reserve of raw materials and implements for supply to producers
  • Creating common service facilities for processing raw materials to semi-finished goods
  • Providing facilities for marketing KVI products
  • Organising training of artisans in these industries
  • Providing financial assistance to institutions/ individuals for development and operation of KVI

Prime Minister’s Employment Generation Programme (PMEGP)

  • In 2008, PMEGP (a credit linked subsidy programme) was introduced by merging Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP). The Programme has been modified and is currently in force for a period of 5 years (FY 2021-22 to 2025-26).
  • PMEGP is implemented by KVIC, as the Nodal Agency at the National level. At the State level it is implemented through State KVIC Directorates, State Khadi and Village Industry Boards (KVIBs), District Industries Centres (DICs) and banks.
  • The identification of beneficiaries under the revised procedure is at the district level by the State/ District level implementation agencies viz. KVIC/ State KVIB and State DICs and banks, etc.

Financial Assistance Provided:

Margin money subsidy provided to the beneficiaries for Setting up New Micro Enterprise Unit.

For Upgradation of Existing PMEGP/MUDRA Units: Capital subsidy support of 15%  (20% in the North East region and the Hill States) of the project cost for upgradation of units earlier supported under PMEGP/MUDRA. Own contribution of the beneficiary 10%.

Project Cost and Bank Loan Component: The ceilings for the project cost and subsidy amounts are as follows

If total project cost exceeds Rs. 50 lakh or Rs. 20 Iakhs for Manufacturing and Service respectively, the balance amount may be provided by banks without any government subsidy.

2nd Loan for upgradation of existing PMEGP/ REGP/ MUDRA units

Eligibility Criteria for Beneficiaries

  • Age: Minimum 18 years old.
  • Income: No income ceiling.
  • Education: At least 8th Standard for projects costing above Rs. 10 lakh in manufacturing sector, and Rs. 5 lakhs in business/service sector.
  • Nature of Project: Only for new project. Existing units are not eligible.
  • Family Criteria: Only one person from a family can avail assistance.

Eligibility Criteria for Projects

For New Units

  • Projects without capital expenditure are not eligible under the programme.
  • Cost of land is not included in the Project Cost. However, cost of built shed/ long lease or rental workshed can be included for a maximum period of 3 years.
  • New viable micro enterprises for all types of activities are eligible. Not eligible: Activities prohibited by the local government/ authorities; and Activities in Negative list of the Programme.

For Upgradation of Existing PMEGP/ MUDRA Units

  • Margin money under PMEGP should be successfully adjusted at end of lock in period of 3 years.
  • First loan under PMEGP/ REGP/MUDRA is repaid in time.
  • The unit is profit making and its turnover and profit will increase with upgradation/ modernisation.

 Bank Finance

  • Extent of Loan: 90% – General category; 95% – special category.
  • Nature of facility: For capital expenditure – Term Loan, For working capital – Cash Credit.
  • Proportion of Working Capital: Maximum project cost is Rs. 50 lakh. Working Capital component should not be more than: 40% (Manufacturing units), and 60% (Service/Trading sector).
  • Interest rate and Repayment Schedule: Banks can charge interest rates as per their policy. Repayment over 3 to 7 years, after an initial moratorium period
  • Collateral Security: No collateral security for loans upto Rs. 10 lakh.
  • Disposal of Loan Application: Decision within 30 days of the receipt of application.

On-line Process Flow of application

Online applications on PMEGP Portal developed and put into operation by KVIC is mandatory.

The lAs shall take the final decision, within three weeks, based on the scoring criteria as detailed below.

  • There shall be an Online Grievance Portal and a Grievance Cell to be setup by the KVlC, HQ.
  • The banks will either sanction or reject the loan application within a stipulated period. Sanction will be issued online and copies of the sanction order will be sent to the applicant as well as to KVIC/ KVIB/ DlC/other IAs within 30 days from the receipt of application from the District Agencies.
  • Bank will release first instalment of loan and submit claim for Margin Money subsidy.
  • Once the subsidy is received in the financing bank within 24 hours it should be kept in Term Deposit – Subsidy Reserve Fund (SRF) for three years in the name of the beneficiary. No interest will be paid on the TDR/ SRF, and no interest will be charged on loan disbursed for the corresponding amount.
  • In case the bank’s advance goes “bad” before the three-year period, due to any reason whatsoever, beyond the control of the beneficiary, subsidy will be returned to KVIC.

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