Financial Inclusion and Performance of Self-Help Group in India: A Comparative Study Across Banking Agencies

Though self-help groups (SHGs) have led to financial inclusion but increasing non-performing assets (NPA) for SHGs is a matter of concern. In this study, we undertake a state-level analysis for India, taking annual data for 2010-2020 and using a panel model. The study analyses the relationship between NPAs of SHGs for a state and the prevalence of banking, the extent of savings and credits, and the state's overall GDP across three bank agencies: commercial banking, regional rural banking, and cooperative banking. It is found that savings and loan disbursement per SHG is effective for commercial banks and cooperative banks. The regional rural banks lag because of greater government inference and mismanagement. Increasing bank branches helps to reduce NPA only when the quality of service is given due importance. The state's overall macroeconomic performance shows a positive correlation with the performance of SHGs. The study concludes with some policy recommendations that can be applied to developing economies like India.