Self Help Group Lending by Commercial Cooperative and Regional Rural Banks – Pavala Vaddi Scheme – Payment of Interest incentive twice in a year - Comprehensive Guidelines – Revised -Orders –Issued.




G.O.Ms.No.136                                                                                 Dated:  9-4-2007



G.O. Ms. No. 152, PR & RD (RD.III) Department, Dated 02.05.2005.




Government in the G.O. read above, issued orders for payment of interest incentive to the Self Help Groups on the interest charged by the banks over and above 3% per annum once in a year based on the performance of the loan account obtaining as on March, 31st of the previous financial year. 


2.       Government have reviewed the policy from time to time and felt it expedient to mitigate hardship and to give more respite to the Self Help Groups.  Accordingly, Government hereby decide to allow payment of interest incentive to the Self Help Groups once in six months i.e. twice in a year based on the performance of the loan account obtaining as on September, 30th and March, 31st instead of once in a year.


3.       For effective implementation of the revised decision, Government after careful examination, hereby issue the following revised comprehensive guidelines for operationalizing the scheme in modification of the guidelines already issued at para no.3 in the G.O. read above. 


3.1       The scheme shall be applicable to all loans extended to Self Help Groups by banks on or after 01.07.2004.


3.2       Interest incentive in respect of active loans shall be released to the groups once in six months i.e. twice in a year based on the performance of the loan account obtaining as on September, 30th and March, 31st.  The SHGs which have completed six months of regular repayment of bank loan shall become eligible for interest incentive.


3.3.          The SHGs which have got bank loan in the month of July or January and which have repaid the loan for at least one month prior to the cut-off date, i.e. September 30th and March 31st shall also be eligible for getting the interest incentive benefit.


3.4             The loan accounts that are classified as overdue in the books of the bank at the time of half-yearly closing and that which are classified as Non-performing Assets at year-end closing are ineligible.


3.5             However, if they resume on-time repayments and regularize the arrears, they are eligible for the incentive in the next half-yearly period.


3.6             The DRDA shall collect from the bank branches the certified statement of list of eligible groups which have repaid regularly. This should be signed by the Bank Manager.


3.7             The DRDAs shall obtain from the bank branches the following lists immediately after close of September, 30th and March, 31st.


3.7 a.   List of active loan accounts as at close of September, 30th and March, 31st for which claim is being made indicating the actual interest applied.


    3.7.b.   List of Groups that have closed / foreclosed their accounts during the year indicating the actual interest applied.



3.8 .  DRDA shall determine the eligible interest incentive and issue proceedings, suo-motu, for release of incentive based on the certified statement of bank branch. This should be completed with in 30 days of every half year i.e. by October,31st and April,30th. The Pavala Vaddi amount shall reach the member of SHG by November, 15th and May 15th.


3.9      The DRDAs shall obtain the details of SHG repayment for the purpose of interest subsidy twice a year.


3.10.      The Mandal Samakhya and their staff will approach the banks twice a year and obtain the details of SHG repayment along with a certified bank statement for all the eligible SHGs.


3.11        The Mandal Samakhya will forward the proposal to DRDA and DRDA will calculate the Pavala Vaddi to be given to each SHG basing on the bank statement.


3.12        The DRDA shall issue proceedings for the SHGs eligible for Pavala Vaddi, indicating the exact amount of Pavala Vaddi incentive to be given to the SHG.  Accordingly, the DRDA shall prepare the cheques Village Organization wise and give them to the Mandal Samakhya along with the statement of particulars accruing to each SHG.


3.13        The Mandal Samakhya in turn shall distribute the cheques to the SHGs through the Village Organizations.


3.14        The SHGs shall give the Pavala Vaddi to the Members directly.


3.15        The amount of incentive given to the members should be recorded in the SHGs minutes book and individual pass book.


3.16        The Pavala Vaddi incentive should reach the members of the eligible SHGs. It should not be retained as the corpus fund  of the Self Help Groups.


3.17        DRDA shall put in place appropriate MIS for SHG-Bank Linkage Programme and update the same at quarterly intervals to monitor the repayment performance of the scheme.


4.  All the District Collectors and Chairmen of the DRDAs shall take action accordingly.


     5.  This G.O. is available on the Internet and can be accessed at the address








The Chief Executive Officer, SERP, AP., Hyderabad.

The Commissioner, Rural Development, AP., Hyderabad

All District Collectors and Chairmen of DRDAs in the State

All Project Directors of DRDAs in the State

The Convener, State Level Bankers, Committee, Andhra Bank, Hyderabad

The Principal Secretary to Govt. Finance & Planning  (Expr.PR&RD) Department

All Heads of the Banks through the Commissioner, Rural Development, Hyderabad

Copy to:

The Principal Secretary to Chief Minister.

The PS to Chief Secretary to Government.

The PS to Minister (RD)

The PS to Principal Secretary (RD)