President Pratibha Patil will launch a scheme whereby loans at an interest rate of 4% will be sanctioned to women's self-help groups (SHGs).

The President is going to Pune for the launch, where she will extend loans to two SHGs from Pune and one each from Solapur, Satara and Nashik.

An official from the women and child welfare department said, "The 4 percent interest replaces the existing 9-11 percent. Around 45,000 SHGs will get Rs 50,000, 72,000 will get Rs 1 lakh and 18,000 SHGs Rs 2 lakh disbursement. These groups will be eligible for higher loans once they repay these loans on time."

The banks that have been chosen to extend such loans are Bank of India, Bank of Maharashtra, Solapur Gramin Bank and State Bank of India. Although these banks will provide loans at much lower interest rates, they will not lose any amount as the state will pay them the remaining amount that they would have earned as interest.

"The aim being to help these women have easier access to credit and help improve their livelihood. The interest subsidy will cost the Government nearly Rs 129.01 crore over three years," the official said.

The creditworthiness record of women has made banks confident about repayment. They are not hesitant in lending to women self-help groups. A senior officer from Bank of Maharashtra says, "The loan repayment of these SHGs is 90 percent and we have no issues in giving them the amount."

Also these loans are expected to motivate women and enhance their performance that would further ensure better returns and regular repayment of loans.

The scheme is likely to benefit around 17 lakh women from rural areas and 1,42,218 SHGs. The beneficiaries are pleased by the initiative of the President.

Manisha Kale from Pune's Garib Nawaz Bachat Gat, which will avail nearly Rs 2 lakh, would soon start working on dairy. They aim high returns and quick repayment from their project.

Tamil Nadu and Andhra Pradesh have also been giving interest subsidies to such organizations. Further NABARD has declared some co-operative banks under the Orissa State Cooperative Bank as Self Help Promotion Institutes (SHPIs) to promote Self Help Groups (SHGs) in Orissa.

India Post, the country's postal department, has also disbursed micro-credit to women self help groups (SHGs) in eight states and the North East through its tie-up with the National Bank for Agriculture and Rural Development (Nabard). The states that have been earmarked for this project are Bihar, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa and Uttar Pradesh.