Chapter 5 - Section 5.3.4Non-Performing Assets (NPAs) in SHG-BLP

The SHG Bank linkage programme has historically shown the best repayment performance among comparable credit portfolios. After several years of steady improvement, FY 2025-26 saw a mild reversal: the overall level of NPAs on bank loans extended to SHGs rose to 2.00% as on 31 March 2026, from 1.74% a year earlier.

Read More

SHG-Bank Linkage Programme: Moving from Financial Inclusion to overall wellbeing

5.3.4 Non-Performing Assets (NPAs) in SHG-BLP

The SHG Bank linkage programme has historically shown the best repayment performance among comparable credit portfolios. After several years of steady improvement, FY 2025-26 saw a mild reversal: the overall level of NPAs on bank loans extended to SHGs rose to 2.00% as on 31 March 2026, from 1.74% as on 31 March 2025. The overall stress faced by the microfinance sector must have also had its effect in the increase of NPAs in SHG-BLP, as there are several members who have loans from both the systems.

Region-wise, the trend was mixed. The NPA percentage declined in the North Eastern region (from 1.71% to 1.47%) and the Central region (from 4.85% to 4.19%), but increased in the Northern (3.68% to 5.36%), Eastern (1.38% to 1.42%), Western (2.75% to 3.23%) and Southern (1.59% to 1.97%) regions. The Northern region now records the highest NPA ratio in the programme, displacing the Central region. Among the lenders, Regional Rural Banks demonstrated the strongest asset quality at 1.22%, followed by Commercial Banks at 1.93%. Loans extended by Cooperative Banks continued to show significantly higher NPAs at 7.01%, although they had limited exposure to SHG lending. Cooperative Banks clearly need to strengthen asset quality, monitoring and portfolio management, alongside targeted capacity building and recovery support.

Figure 5.8: Trend in Region-wise and Agency-wise Gross NPAs in SHG-BLP
Figure 5.8: Northern Region gross NPA trend
Figure 5.8: North Eastern Region gross NPA trend
Figure 5.8: Eastern Region gross NPA trend
Figure 5.8: Central Region gross NPA trend
Figure 5.8: Western Region gross NPA trend
Figure 5.8: Southern Region gross NPA trend
Figure 5.8: Agency-wise gross NPA trend

Despite the continued expansion in the value of savings, credit disbursement and loan outstanding, a substantial credit-linkage gap persists. As of 31 March 2026, only 83.25 lakh of the 145.63 lakh savings-linked SHGs had loans outstanding with banks, implying a credit gap of 42.84%. This indicates significant scope for improving the conversion of savings-linked SHGs into credit-linked groups, particularly through timely first-cycle and repeat credit, better bank-SHG engagement and stronger livelihood-based credit planning. The programme also continues to show regional variation. The Southern and Eastern regions remained the largest contributors to the SHG-BLP, together accounting for a substantial share of savings-linked SHGs, savings balances, loan disbursements and loan outstanding. The variation in average savings, credit linkage, loan size and credit gap across regions points to the need for differentiated strategies based on SHG maturity, institutional capacity, livelihood opportunities and bank presence.

Going forward, the focus of SHG-BLP needs to move beyond the expansion of savings accounts and group loans towards improving the quality of financial access. This includes reducing the credit-linkage gap, strengthening repeat credit, expanding enterprise finance for mature SHGs and individual members, improving digital financial capability, and facilitating access to insurance, pensions, health protection and other social-protection schemes. The next phase of SHG-BLP should therefore be assessed not only by the number of groups linked with banks, but also by its contribution to women-led enterprise, household resilience, sustainable livelihoods and economic empowerment