SHG Savings vs Loan Funds: How to Keep Separate Records
How a self-help group should record member savings, revolving fund, bank loans and interest separately, with registers, a ₹3.57 lakh worked example and fixes.
In this article (9 sections)
A self-help group (SHG) should record member savings, mission funds (revolving fund, community investment fund), bank loans and interest income under separate heads, even when all the money sits in one bank account. Savings belong to members; a bank loan is a debt the group must repay; interest and fees are the group's own income. Mixing them makes members think they have more savings than they do, misstates the group's corpus and weakens the bank's grading. Rules described here are as of November 2026; your State Rural Livelihood Mission (SRLM) or promoting agency may prescribe its own formats.
For how SHG bank loans, rates and doses work, read our NRLM SHG loan and Lakhpati Didi guide.
Why separation matters
The RBI master circular on DAY-NRLM (1 April 2025) lists "maintenance of proper books of accounts" among the Panchasutras, and says a group must be in active existence for at least 6 months as per its books of accounts before bank linkage. Banks grade the group partly on those books.
Separation also matters because the bank sizes the loan on the corpus. The circular defines corpus as the revolving fund received by the SHG, its own savings, interest earned from internal lending and funds from other sources. The bank loan itself is not corpus. If the treasurer adds the loan into "savings", the corpus looks bigger than it is and members get a false picture of what they own.
The fund heads every SHG should track
| Fund head | Whose money | Where it comes from | Repayable to |
|---|---|---|---|
| Member savings | Each member | Monthly thrift | The member, as per group rules |
| Revolving fund (RF) | The group | DAY-NRLM, typically ₹20,000-30,000 per SHG | Not repayable in the normal course; check SRLM terms |
| Community investment fund (CIF) loan | Owed by the group | Village or cluster federation | The federation |
| Bank loan (term loan or cash credit) | Owed by the group | Bank branch | The bank |
| Interest and penalties earned | The group | Interest charged on loans to members | Retained or shared as per rules |
| Grants or other funds | The group | Scheme or donor | As per the sanction terms |
Keep the first column in mind: only the first row is a member's personal money.
Registers to keep
Most SRLMs and promoting agencies use some version of the following set. Some states have moved bookkeeping to the mission's digital system, but the logic is the same.
- Minutes book: every meeting, attendance, decisions on loans, savings rate and interest rate.
- Savings register or ledger: one row per member per month, showing amount due, paid and cumulative balance.
- Loan ledger: one page per member showing each loan, its source (savings, RF, CIF or bank), instalments, interest and balance.
- Cash book: every receipt and payment in cash or through the bank, with a running balance.
- General ledger: one page per fund head (savings, RF, CIF, bank loan, interest income, expenses) so each balance is visible.
- Member passbooks: each member's own copy of her savings and loan position.
- Bank passbook or statement: reconciled with the cash book every month.
Tag every loan by its source
When the group lends ₹10,000 to a member, write in the loan ledger whether the money came from own savings, RF, CIF or the bank loan. This matters when the bank or federation asks how its money was used, and when a member leaves and the group needs to know whose funds are tied up.
Worked example: one bank account, five fund heads
A 12-member SHG has been running for 24 months. Each member saves ₹200 a month.
- Member savings: 12 × ₹200 × 24 = ₹57,600 (₹4,800 per member)
- Revolving fund received: ₹30,000
- Interest earned on internal loans so far: ₹9,800
- Bank loan outstanding: ₹2,60,000
Corpus = ₹57,600 + ₹30,000 + ₹9,800 = ₹97,400. The bank loan is a liability, not corpus.
Where the money is today:
| Sources | ₹ | Uses | ₹ |
|---|---|---|---|
| Member savings | 57,600 | Loans outstanding with members | 3,10,000 |
| Revolving fund | 30,000 | Balance in SHG bank account | 45,900 |
| Interest income | 9,800 | Cash in hand with treasurer | 1,500 |
| Bank loan outstanding | 2,60,000 | ||
| Total | 3,57,400 | Total | 3,57,400 |
Both sides match, which is the check the treasurer should do every month.
Now the common mistake. If the treasurer writes the whole ₹3,57,400 as "group savings", each member assumes her share is ₹3,57,400 ÷ 12 = ₹29,783. Her real savings are ₹4,800. When someone leaves or the group decides to share out, that gap causes disputes.
The bank loan carries interest and must be repaid in instalments; test a repayment schedule for the group in the EMI calculator.
Monthly closing checklist
- Total of savings register equals the savings balance in the general ledger.
- Sum of all member loan balances equals "loans outstanding" in the general ledger.
- Cash book balance equals bank statement plus cash in hand.
- Bank loan balance in your books equals the bank's statement.
- Interest collected is posted to interest income, not to savings.
- RF and CIF balances are shown separately, not inside savings.
- Minutes record any change in savings amount, interest rate or loan given.
- Two office bearers sign the monthly totals; members can see their passbooks.
Common mistakes and fixes
| Mistake | Fix |
|---|---|
| Bank loan written as savings | Open a separate "bank loan" page in the general ledger and reverse the wrong entry with a minuted resolution |
| Interest added to each member's savings | Keep interest as group income; share it only if and when the rules say |
| RF divided among members' savings | Show RF as a group fund; ask your SRLM how it must be used |
| No source tag on member loans | Note the source (savings, RF, CIF, bank) on every loan entry from now on |
| Cash kept at treasurer's home for months | Deposit regularly; keep cash in hand small and recorded |
| Bank statement never checked | Reconcile monthly and note differences in minutes |
Rights that protect the group's savings
- No lien on savings: the RBI DAY-NRLM circular says no lien should be marked against SHG savings accounts and no deposits should be insisted upon when sanctioning loans.
- No collateral up to ₹10 lakh: no collateral or margin on loans up to ₹10 lakh; above that up to ₹20 lakh, a margin of up to 10% of the amount above ₹10 lakh may be taken.
- KYC: banks follow RBI's KYC master direction for SHG members and office bearers; opening savings accounts for every member is not a precondition for credit linkage.
If a branch blocks savings or demands deposits, write to the branch manager, then the bank's grievance redressal officer, and after 30 days approach the RBI Integrated Ombudsman at cms.rbi.org.in. Your block or district SRLM staff can also take it up at bankers' meetings.
Related guides
- How should an SHG record loans between its members?
- SHG business profits vs member wages
- Keeping personal and business money separate
Key takeaways
- Record member savings, RF, CIF, bank loan and interest income under separate heads, even in one bank account.
- Corpus is savings plus RF plus interest earned plus other funds; the bank loan is not corpus.
- In the example, each member's real savings were ₹4,800, not the ₹29,783 a mixed record suggested.
- Tag every loan to a member with its source and reconcile books with the bank every month.
- Banks should not mark a lien on SHG savings or insist on deposits under DAY-NRLM rules.
Related guides: How to Reconcile an SHG Passbook With the Group Ledger, SHG Digital Bookkeeping: Who Approves Entries and Access.
Frequently asked questions
Why should an SHG keep savings and loan funds separate in its books?
Members' savings belong to the members, while a bank loan is money the group owes and must repay. If both are mixed under one heading, members cannot see their own savings, the group's corpus is misstated and the bank's grading of the books can suffer.
What is included in an SHG's corpus?
Under the RBI master circular on DAY-NRLM, corpus includes the revolving fund received by the SHG, its own savings, interest earned from internal lending and funds received from other sources. The bank loan the group owes is not part of corpus.
Which books should an SHG maintain?
Most groups keep a minutes book, a savings register or ledger, a loan ledger for each member, a cash book, a general ledger and member passbooks. Your State Rural Livelihood Mission or promoting agency may prescribe its own formats or a digital system.
Can the bank put a lien on our SHG savings account for the loan?
The RBI master circular on DAY-NRLM says no lien should be marked against SHG savings accounts and no deposits should be insisted upon when sanctioning loans. If a branch asks, raise it with the branch manager, the bank's grievance officer and then the RBI Ombudsman.
Should the revolving fund be shown as member savings?
No. The revolving fund is support given to the group as a whole, so record it under its own head. It counts in the corpus but is not any single member's savings.
This article is for general education and is not personalised financial, tax or legal advice. Rates and rules are as of 3 Nov 2026; confirm current terms with your lender, AMC or a qualified adviser.
