Banking News

DRI loan Scheme: The scheme of financial assistance to low income groups


DRI loans scheme (also known as DIR loan scheme) was introduced in the year 1972 to financially assist chosen low income groups. The loan scheme envisages lending by banks to weaker section of the society at a uniform concessional rate of interest of 4% per annum. The borrowers under this category of loan are rural landless people or people of small holding or people who do not employ paid employees on regular basis and largely work on their own. In order to ensure that weaker section of the rural areas get maximum benefit under the scheme, banks are guided by RBI to route bulk of their DRI advances through rural and semi-urban branches. Under DRI scheme banks are required to reach target of 1 per cent of total advances outstanding as at the end of the previous year. Under DRI loan scheme, banks are required to ensure that minimum 40 per cent of their loan beneficiaries should be from scheduled castes/scheduled tribes and at least two third of the loans should be disbursed through rural and semi-urban branches. The availability of DRI loans is only to the borrowers who are not assisted to under any of the subsidy linked schemes of Central/State Government and State owned Corporations.
DRI beneficiaries are people who normally engaged in the fields of cottage and rural industries viz. Basket makers, blacksmiths, broom makers, carpenters, cobblers, cycle repairers, fire wood sellers, fish vendors, glass bangle sellers, handicrafts, hawkers, leather farmers, mat makers, pan shops and tobacco merchants, papad makers, potters, roadside tea stall cum eating houses, rope makers, sellers of eatable’s, tailors, vegetable vendors, home delivery service or article and commodities of daily use, driving one’s own manual rickshaw or cycle rickshaw , repairers of shoes sandals mainly by hand etc. The poor students of merit who do not get scholarships/maintenance grants from Government or educational authorities for higher education and physically handicapped persons pursuing gainful employment could also be financed under the DRI loan scheme.
The applicants of DRI loans shall satisfy the following conditions:
• Should be pursuing a gainful occupation.
• Family income from all sources should not exceed Rs.18, 000/- p.a. in rural areas and Rs.24, 000/- p.a. urban / semi urban areas
• Should not have hand holding exceeding 1 acre if irrigated, and 2.5 acres if un-irrigated. SCs/STs are eligible for loan irrespective of their land holding, provided they satisfy other eligibility criteria.
• Should not incur liability to two sources of finance at the same time.
• Should work largely on their own and with such help as other members of their family or some joint partners may give them and should not employ paid employers on a regular basis.
• Amount of loan: The amount of loan will depend on the particular scheme proposed to be financed. It should be adequate to enable the borrower to finance his requirements without having to borrow from other sources. The normal limit will be Rs.15000/- by way of working capital and or a term loan. The maximum limit for housing loans under the scheme is Rs.20,000/-
• Physically handicapped persons: In the case of physically handicapped persons, a sum of Rs.5, 000/- for purchase of aids, appliances and equipment may be granted, under DRI loan apart from the maximum loan amount of Rs.15, 000/- generally considered.
• Margin: No margin is required to be provided by the borrower.
• Security: Hypothecation of assets purchased out of loan.
• Repayment: Maximum 5 Years. However in case of housing loans, the repayment period is extendable to 7 years in hardship cases.
• Documentation: Same way the execution of documents by an illiterate person.
• Rate of interest: Keeping in view the social objective the interest will uniformly be charged 4% p.a.
In addition to the individual beneficiaries mentioned above, the following institutional beneficiaries are covered under DRI scheme. The entities like Orphanages and Women’s homes, Institutions for physically handicapped/mentally retarded Co-operative Societies where the amount is lent on the same terms and conditions as are applicable to State owned Corporations for the Welfare of SC/ST.

(2) Comments

    1. Surendra NaikSurendra Naik - Post author

      Dear Manoj, It's a good question. The security under the DRI scheme is hypothecation of assets purchased out of loan as per prevailing guidelines. No collateral or third party guarantees to be asked. But, the lender’s right under the term “Hypothecation of assets” is not defined in anywhere in the statute. Some courts have even compared ‘hypothecation to mortgage of movables’. In the instant case, the immovable property (house) is the asset created out of loan which cannot be hypothecated but same may be secured by mortgage. Since the loan amount is very meager (Maximum Rs.20000/-), the borrower may be asked to deposit the title deed (under equitable mortgage) with the bank without going for Registration or RoM so as to avoid further expenses. The branches are provided with guidelines from their Head Office about how to disburse Housing Loan under DRI scheme.

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