(1) No MFI shall extend a further loan to a SHG or its members where the SHG has an outstanding loan from a Bank unless the MFI obtains the prior approval in writing in such manner as may be prescribed from the Registering Authority after making an application seeking such approval.
(2) The Registering Authority while considering such application from an MFI seeking approval as aforesaid, shall secure the following information in writing from the MFI in regard to every member of SHG namely; -
(i) name of the Borrower;
(ii) name of the SHG;
(iii) bank from which loan has been obtained by the SHG;
(iv) date of the loan granted by the bank;
(v) amount paid to the SHG by the bank;
(vi) amount due from the SHG;
(vii) fresh amount of loan sought by the SHG from the MFI;
(viii) terms of repayment proposed by the MFI;
(ix) details of due diligence including the capacity of the SHG for repayment; and
(x) such other details as may be prescribed.
(3) The Registering Authority shall, not later than fifteen days from the date of filing of such application for approval under sub-section (2), cause an enquiry into the contents of the application and shall grant approval for further loan unless the Registering Authority is satisfied that the SHG and its members have passed a resolution that they have understood the conditions of the loan and terms of repayment and unless the Registering Authority is also satisfied that such further loan would generate additional income to the SHG and its members, needed for servicing the debt.
(4) No MFI shall grant loan to a member of SHG during the subsistence of two previous loans irrespective of the source of the previous two loans.