Q1. [1] medium thorough-understanding
Which of the following best explains why banks are willing to give loans to Self Help Groups even though the individual members have no collateral?
(A) The government guarantees repayment of all SHG loans.
(B) The group collectively takes responsibility for repayment, so peer pressure among members ensures defaults are followed up seriously.
(C) SHG members always deposit large savings with the bank before receiving a loan.
(D) RBI directs banks to give loans to SHGs without any conditions.
- A The government guarantees repayment of all SHG loans.
- B The group collectively takes responsibility for repayment, so peer pressure among members ensures defaults are followed up seriously.
- C SHG members always deposit large savings with the bank before receiving a loan.
- D RBI directs banks to give loans to SHGs without any conditions.
Generated by claude-sonnet-4-6 · 2026-06-26 13:25 · grounding rag
Model Answer
(B) The group collectively takes responsibility for repayment, so peer pressure among members ensures defaults are followed up seriously.
Explanation
The passage directly states: "It is the group which is responsible for the repayment of the loan. Any case of non-repayment by any one member is followed up seriously by other members." This collective responsibility replaces the need for collateral. Options A and D are factually incorrect; Option C is not stated in the text.