Before a Joint Liability Group (JLG) can obtain a loan from a bank, the group is generally required to be formed and promoted by a recognized individual or institution known as a JLG Promoting Institution (JLPI). These promoting institutions may include NGOs, Farmers’ Clubs, Business Correspondents, Cooperative Societies, Microfinance Institutions, Panchayati Raj Institutions, Agricultural Universities, or other eligible organizations.
Once the JLG is formed, banks require certain documents to establish the identity of members, assess creditworthiness, and create a legal framework for lending.
Know Your Customer (KYC) Documents
All members of the Joint Liability Group must comply with the bank’s Know Your Customer (KYC) requirements. KYC documents help banks verify the identity and address of borrowers and comply with regulatory guidelines.
Common KYC documents include:
- Aadhaar Card
- Voter Identity Card
- PAN Card (if available)
- Driving Licence
- Passport
- Any other officially valid document accepted by the bank
Proof of address and recent photographs may also be required.
Loan Application Form
The JLG or its members must submit a prescribed loan application form provided by the bank. The application contains details regarding:
- Name and address of members
- Nature of economic activity
- Purpose of the loan
- Loan amount required
- Repayment capacity
- Details of the Joint Liability Group
The application serves as the primary document for evaluating the credit proposal.
Inter-Se Agreement
The Inter-Se Agreement is one of the most important documents in the JLG lending process.
This agreement is executed among all members of the Joint Liability Group and formally records their understanding that they will be jointly and severally responsible for the repayment of loans obtained by members of the group.
The agreement establishes:
- Mutual trust among members.
- Joint liability for loan repayment.
- Rights and responsibilities of each member.
- Commitment to support repayment obligations.
The Inter-Se Agreement acts as the foundation of the joint liability concept.
Demand Promissory Note (DPN)
A Demand Promissory Note (DPN) is a legal document executed by the borrower in favor of the bank. Through this document, the borrower promises to repay the loan amount along with applicable interest whenever demanded by the bank.
The DPN serves as an important legal instrument and provides documentary evidence of the borrower’s repayment obligation.
Summary of Documents Required
| Document | Purpose |
|---|---|
| KYC Documents | Verification of identity and address of members |
| Loan Application Form | Details of borrower, loan requirement, and purpose |
| Inter-Se Agreement | Establishes joint liability among group members |
| Demand Promissory Note (DPN) | Legal promise to repay the loan |
Conclusion
To obtain bank finance, a Joint Liability Group must first be properly formed and promoted by a recognized JLG Promoting Institution. Banks generally require KYC documents, a loan application form, an Inter-Se Agreement, and a Demand Promissory Note (DPN) before sanctioning loans. These documents help ensure proper identification of borrowers, establish joint liability among members, and provide legal protection to the lending institution.