Deendayal Antyodaya Yojana-National Rural Livelihoods Mission Overdraft facility for women SHG members launched

What is the News?

The Ministry of Rural Development has launched an overdraft facility to women Self Help Groups (SHGs) under Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).

Under this, an overdraft facility of Rs 5,000 will be available to verified SHG members under DAY – NRLM having accounts under the Prime Minister Jan Dhan Yojana with Banks. 

It is estimated that about 5 crore women SHG members under DAY-NRLM would be benefitted from this facility eventually. 

What is an Overdraft Facility?

Overdraft facility allows account holders to make withdrawals from an existing savings bank account even after the balance reaches zero. 

In other words, if you have an approved overdraft limit of ₹ 50,000 and have ₹ 1 lakh in your account at present, you can withdraw up to ₹ 1.5 lakh.

How is Overdraft Facility different from a Personal Loan?

When one apply for a personal loan, and it is approved and disbursed by the bank, the amount is credited to the account. Once the amount is disbursed, the levy of interest starts immediately on the entire amount. For instance, if one take a ₹ 50,000 personal loan, irrespective of whether the person used the amount or not, s/he will have to pay interest on the entire sum, until s/he repay the loan. 

In case of an overdraft, the person doesn’t have to pay interest until s/he actually withdraw the amount. Moreover, interest is charged only on the amount being used and not on the entire limit. For instance, if one has an overdraft limit of ₹ 50,000, but he withdraws only ₹25,000 using the overdraft facility, the interest will be applicable only on ₹ 25,000 and not on the entire sum of ₹50,000. 

Source: This post is based on the article ‘Deendayal Antyodaya Yojana-National Rural Livelihoods Mission Overdraft facility for women SHG members launched’ published in PIB on 25th Dec 2021.