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Microfinanceहिंदी में पढ़ें

Group loans (JLG and SHG): will I have to pay for someone else?

6 min read
Group of women in colourful saris talking together outdoors

Short answer: A group loan is still your own loan. Do you have to pay when another member can’t? That depends on what your loan agreement says. RBI rules don’t require it, but many group (JLG) contracts make members pay for each other. Before you join, ask to see that part of the contract in your language. Lenders can’t take a deposit or collateral (security such as gold or property) from you, and they can’t block your savings account. Recovery staff must also follow strict rules on where and when they collect.

The situation

Rekha’s group of five women each repays ₹1,000 a week. Then Meena falls ill and can’t pay for a month. The loan officer says, “The group must cover her.” Is that true?

SHG loan or JLG loan? They’re different

SHG–bank linkage (under DAY-NRLM) JLG / group loan from a bank or MFI
Who borrows The self-help group borrows from a bank as one unit Each member borrows; the group stands behind each loan
Group size 10–20 women Usually 4–10 people
Starts with Regular savings and meetings, then loans The loan, with group meetings to collect payments
Interest Lower, with government support, for eligible rural women’s SHGs (7% on loans up to ₹3 lakh in 2025–26; ask your bank for this year’s rate) The lender’s own rate. Check the APR in your KFS
If one member can’t pay The group decides for itself Depends on your contract, often “joint and several”

In the table, an MFI is a microfinance lender. The APR is the full yearly cost of the loan, and the KFS (Key Facts Statement) is the short sheet that shows it. “Joint and several” means the lender can ask any one member, or all of them, to pay the whole amount due.

A ₹ example

Fictional. Calculated by Paisavy.

The agreement in Rekha’s group says the others cover a missed instalment. So Meena’s ₹1,000 a week is shared by the other four:

  • Each pays ₹1,000 ÷ 4 = ₹250 extra a week
  • Over 4 weeks: ₹1,000 extra each, on top of their own ₹4,000

Rekha’s weekly payment jumps from ₹1,000 to ₹1,250. That is 25% more, with no warning. Keep a little money aside for exactly this.

What lenders can and can’t do

Under RBI’s microfinance rules:

  • The lender can’t take a deposit, margin or collateral. It also can’t put a lien on your bank account (a hold that stops you using your own money).
  • Training must be free.
  • Staff collect repayments at a place you agreed. They may come to your home or workplace only if you failed to come to that place two or more times in a row.
  • Harsh behaviour is banned. That covers rude or abusive words, calls to late borrowers before 9 am or after 6 pm, troubling your relatives, making your name public, and threats.
  • How often you repay should suit you, and the lender’s policy must leave room to change it.
  • No product (insurance, a solar lamp, a sewing machine) can be a condition for getting the loan.

Questions to ask before you join

  1. Is this an SHG loan (the group borrows) or an individual loan with group guarantee (JLG)?
  2. Does my agreement make me liable for other members? (Liable means you have to pay.) Show me that part in my language.
  3. Where and when will you collect repayments?
  4. What happens if a member falls ill or moves away for work? Can the payment dates be changed?
  5. Are you selling anything with the loan? (You can say no.)
  6. Who is the grievance officer, the person who handles complaints? Their name and phone number must be on your loan card.

Myths

“RBI makes all members pay for each other.” No. Your contract decides.

“The lender can keep my savings if someone doesn’t pay.” Microfinance lenders can’t take deposits or put a lien on your account. An SHG’s own rules about its savings are a separate matter, so ask.

“Agents can come to my house any time.” Only after you failed to come to the agreed place two or more times in a row, and never with threats.

What to check today

  1. Find the joint-liability clause (the part about paying for others) in your agreement or loan card.
  2. Write down the grievance officer’s name and number.
  3. Agree a “sick member” plan with your group before anyone needs it.

Try it with your own numbers

→ Can I afford it? (household mode): include all family loan payments and test a month where you cover one member.

Sources and review

Try it with your numbers
Can I afford it? (household)
Open tool →

Educational information, not financial advice. Found an error? Tell us → · Corrections log

Frequently asked questions

Do I have to pay if another member of my group loan doesn't pay?

It depends on your loan agreement. RBI rules don't require members to pay for each other, but many JLG (joint liability group) contracts do. Some say "joint and several". That means the lender can ask any one member, or all of you, for the whole amount due. Before you join, ask to see that clause in your language.

What is the difference between an SHG loan and a JLG loan?

In an SHG–bank linkage loan, the self-help group borrows from a bank as one unit. It usually starts with regular savings and meetings. In a JLG loan, each member borrows on their own, and the group stands behind each loan. If an SHG member can't pay, the group decides what to do. In a JLG, your contract decides.

Can the lender keep my savings if a group member doesn't pay?

A microfinance lender can't. It can't take a deposit, margin or collateral from you. It also can't put a lien on your bank account (a hold that stops you using your own money). Your SHG's own rules about group savings are a separate matter. Ask your group how those savings are used when a member falls behind.

Can recovery agents come to my house for a group loan?

Only in one case. Staff should collect at a place you agreed. They may come to your home or workplace only if you failed to come to that place two or more times in a row. Threats, abusive words, troubling your relatives and making your name public are all banned. If this happens, complain to the lender, then read How to complain.

How much extra will I pay if one member stops paying?

Take a made-up group of five, each paying ₹1,000 a week. One member falls ill and stops for a month. If the agreement makes the others cover her, each pays ₹250 extra a week. Over 4 weeks that is ₹1,000 extra each, a 25% jump with no warning. Keep a little money aside, and agree a "sick member" plan with your group early.

Do I have to buy insurance or a product to get a group loan?

No. Products like a solar lamp, a sewing machine or extra insurance can't be a condition for the loan, and you can say no. Only credit-linked insurance (cover for the loan itself) can be part of it. Its cost must show in the APR in your KFS. Training must be free too. If staff push a product, contact the grievance officer named on your loan card.