Small borrowers repay: 0.22% default rate, Shah says

Union Cooperation Minister Amit Shah said small borrowers are the most dependable credit risk in the banking system, citing a 0.22% default rate on a collateral-free loan scheme he introduced at Ahmedabad District Co-operative Bank.

The scheme started at ₹2.50 lakh without collateral or guarantee. Shah said the bank's CEO, a veteran banker, initially dismissed it as a "loan mela" and alleged the chairman approved it to further a political agenda. The loan ceiling has since been raised to ₹5 lakh. Speaking at an event at the BSE, Shah said he checked with the bank before arriving whether the scheme was still running.

"Before coming to this function, I checked with the Bank whether the scheme, whose loan amount has been upsized to ₹5 lakh, is still running. They told me that the default rate in this scheme is only 0.22 per cent. That means 99.78 per cent of the loans have been returned with interest," he said.

Shah's central claim was that collateral is not the binding constraint on repayment; borrower honesty is. He used the figure to argue that co-operatives, including banks, have a major role in generating self-employment, and that common people's co-operatives should aggregate savings into a large pool for bigger business. The savings-pooling model, he said, is what lets co-operatives operate at a scale individual members could not reach. Amul is the model he cited: 36 lakh women members, each investing less than ₹100, now produce a turnover of ₹1.25 lakh crore.

On the same platform, Shah set a one-year deadline for the country's 1,400 urban cooperative banks (UCBs) to join the National Urban Cooperative Finance and Development Corporation (NUCFDC), the umbrella body launched in March 2024. Only 690 UCBs are members so far.