A women’s self-help group in Tamil Nadu needs 10 to 20 members and at least six months of regular meetings and savings before a bank will lend to it. After that, the first loan can be six times the group’s corpus or ₹1.5 lakh, whichever is higher, with no collateral for loans up to ₹10 lakh. Those rules come from the Reserve Bank’s master circular on the National Rural Livelihoods Mission, updated on 1 April 2025.
In Tamil Nadu, SHGs are organised under Mahalir Thittam, the state’s women’s empowerment programme, implemented by the Tamil Nadu Corporation for Development of Women. This guide explains how a group is formed, what banks offer, and where Chennai women should go.
Mahalir Thittam and who runs it
The SHG approach started in Dharmapuri district in 1989 with help from the International Fund for Agricultural Development and was extended statewide from 1997-98, according to the Rural Development Department’s Mahalir Thittam page. The Tamil Nadu Corporation for Development of Women (TNCDW) moved from the Social Welfare Department to Rural Development and Panchayat Raj in 2006. NGOs and community organisations help form groups, train members and monitor them.
The new government has kept the SHG movement at the centre of its rural plans. The department’s 2026-27 policy note calls SHGs the main channel for rural women’s access to credit and income, and names the Singappenngal Valimaippaduthum Thittam as the current initiative to strengthen the movement. The note gives no budget or coverage figures for it, so details are still to come.
Chennai is fully urban, so groups here fall under the urban side of Mahalir Thittam, with the Greater Chennai Corporation’s urban livelihoods wing involved in formation and bank linkage. Rural-mission interest subsidies described below apply to rural groups; urban groups have their own scheme terms.
How to form or join a group
- Gather members. Ten to 20 women, usually neighbours with similar economic backgrounds. Groups are normally women-only. Special groups of persons with disabilities, elders or transgender persons can be mixed, and groups in difficult areas can have as few as five members.
- Agree on rules. Choose two office bearers, called the animator and representative, fix a meeting day and a regular savings amount.
- Open a savings account. Registered or unregistered SHGs can open a savings bank account with simplified KYC, without needing a loan first, according to RBI’s SHG-bank linkage circular.
- Follow the “Panchasutras”. Regular meetings, regular savings, internal lending, timely repayment and up-to-date books. Banks check these before lending.
- Get graded. After six months, a committee including a Mahalir Thittam officer, a banker and an NGO representative rates the group on savings, meetings, records and repayment.
- Apply for credit linkage. A group that passes grading becomes eligible for a bank loan and for any revolving fund on offer.
Every member gets four days of basic training. Office bearers get extra training, and members starting a business can take skill and entrepreneurship courses. To join an existing group, ask local women already in one, or contact the Mahalir Thittam project office for Chennai.
What the bank offers
| Loan dose | Minimum amount |
|---|---|
| First | 6 times corpus or ₹1.5 lakh, whichever is higher |
| Second | 8 times corpus or ₹3 lakh, whichever is higher |
| Third | At least ₹6 lakh |
| Fourth onward | Above ₹6 lakh |
Corpus means the group’s savings plus revolving funds and interest earned on internal lending. Banks may instead give a cash-credit limit of at least ₹6 lakh for three years, with drawing power that rises each year.
- Security: up to ₹10 lakh, no collateral, no margin and no lien on the savings account. From ₹10 lakh to ₹20 lakh, still no collateral, but the bank may ask for a margin of up to 10% on the amount above ₹10 lakh.
- Interest for rural women’s groups (2025-26): loans up to ₹3 lakh at 7% a year, backed by government interest subvention, while the account stays regular.
- Member defaults: one member’s default should not stop a bank lending to a group that is not itself in default, though the loan cannot be used to finance that member.
- Priority sector: SHG loans can be counted as priority-sector lending, which is why banks have targets for them.
Tips for a Chennai group
- Keep the books carefully. Grading depends on them, and so does the size of the next loan.
- Repay on time. Interest subvention is paid only while the loan account is regular.
- Do not pay anyone to “arrange” a loan. Bank linkage through Mahalir Thittam is a government process.
- Keep group loans separate from personal microfinance loans. Taking on several loans at once is a common route to debt trouble.
For borrowing decisions, discuss repayment capacity with your bank’s branch manager or a financial counsellor.
Quick answers
How many members does an SHG need?
Ten to 20 in most cases, and as few as five for special groups in difficult areas or of persons with disabilities.
How soon can a new group get a loan?
After at least six months of active functioning and a successful grading.
Do SHG loans need collateral?
No collateral up to ₹20 lakh. Up to ₹10 lakh, banks also cannot demand a margin or a lien on savings.
Is Mahalir Thittam still running under the new government?
The 2026-27 policy note keeps SHGs as a core programme and names the Singappenngal Valimaippaduthum Thittam to strengthen them.
Information checked against official sources on 18 October 2026. Fees, dates and rules can change; confirm on the linked official pages before acting.
Sources
- Master Circular: Deendayal Antyodaya Yojana – National Rural Livelihoods Mission, 1 April 2025 (Reserve Bank of India)
- Master Circular on SHG-Bank Linkage Programme, 1 April 2025 (Reserve Bank of India)
- Mahalir Thittam (Rural Development and Panchayat Raj Department, Government of Tamil Nadu)
- Policy Note 2026-27 (Rural Development and Panchayat Raj Department, Government of Tamil Nadu)
