Revolving Credit Operations

Circular No: 05/2016

Reference: NP/19/11/Dept/Cir
Date: 12.08.2016

To: All Rural Development Officers / Development Officers, Department of Rural Development, Northern Province.

Subject: Procedures to be followed regarding Revolving Credit Operations implemented by Village / Women's Rural Development Societies

Introduction

With the objective of ensuring that revolving credit operations conducted by Village and Women's Rural Development Societies are carried out transparently and in an orderly manner according to proper procedures, the Department has decided that the following procedures shall be followed by the Treasurers of the respective societies as a basis for carrying out these operations.

Procedures for Revolving Credit Operations

1. Loan Disbursement

I) Application Procedure

For the purpose of providing loans, the procedure of receiving applications from the respective beneficiaries must be followed. A sample application form is attached as Annexure I - Loan Application Form.

II) Subscription Verification

When providing a loan application form, the society's Treasurer must first verify whether the subscription for the respective year has been paid before issuing the application form. This ensures that only members in good standing are eligible for loans.

III) Approval by Society Bodies

All loan applications must be considered at the society's General Body / Executive Committee meeting, and the beneficiaries to whom loans will be provided shall be selected. This ensures collective decision-making and transparency in beneficiary selection.

IV) Summary Sheet Requirement

To obtain approval for fund disbursement related to loan provision, the Treasurer must submit a completed Summary Sheet containing details of the beneficiaries to be provided loans to the Rural Development Officer. This form is essential as it contains information required by the Rural Development Officer for data entry into the computer regarding beneficiary details. A sample form is attached as Annexure II - Self-Employment Loan Beneficiary Details.

V) Payment Voucher Procedure

When loan funds are provided to beneficiaries, a payment voucher (Voucher) shall be prepared by the Treasurer, and after obtaining the signature confirming receipt of funds, the loan shall be provided. Societies that have not been using the payment voucher system so far shall take steps to use it in the future. Instructions regarding this shall be provided by the Rural Development Officer.

2. Loan Recovery

I) Receipt Issuance

When recovering loan installments, the Treasurer must issue a receipt to the person making the payment. Societies that do not have a receipt system shall take steps to implement this.

II) Clear Specification on Receipt

The receipt shall clearly specify the loan installment amount, interest amount, and any late fees/penalty fees collected. This ensures transparency and proper record-keeping.

III) Member Loan Recovery Register

All loan recoveries must be recorded monthly by the Treasurer in the Member Loan Recovery Register maintained by the Treasurer (on pages allocated separately for each beneficiary). A sample register is attached as Annexure III - Member Loan Register.

IV) Bank Deposit

All loan recoveries must be deposited by the Treasurer into the respective bank account at the end of each month. This ensures funds are safely held and properly accounted for.

V) Monthly Recovery Report

A report of the loan recoveries made during the respective month must be submitted by the Treasurer to the Rural Development Officer before the 5th of the following month. A sample format is attached as Annexure IV.

VI) Documentation for Reporting

When submitting the loan recovery report, the Treasurer must bring the bank passbook showing the deposit of recovered funds, the receipt book containing carbon copies of receipts issued to beneficiaries, and the Member Loan Register along with the loan recovery report.

VII) Verification by Development Officers

The Institutional Development Officers working in Divisional Secretariat offices in conjunction with the Rural Development Officer (or the Rural Development Officer in the absence of Development Officers) shall scrutinize the above-mentioned report and registers submitted by the Treasurer, confirm that proper records are maintained, sign the relevant register, and assist the Treasurer in maintaining proper records.

3. Incentive for Treasurers

Considering the workload on the Treasurer when following the above procedures, the Department grants permission to provide an incentive to the Treasurer/Bookkeeper performing the task of loan recovery, from the interest income amount decided by the society (not exceeding 20%), as an allowance for performing this specific duty.

To receive this incentive, the Treasurer/Bookkeeper must submit the loan recovery report to the Rural Development Officer before the 5th of the following month and obtain written permission from the Rural Development Officer for the eligible incentive amount for that month's loan recoveries. Only after receiving this written permission can the Treasurer/Bookkeeper obtain the relevant allowance. For this purpose, it is appropriate for the Treasurer/Bookkeeper to maintain a small register (about 03 pages).

Therefore, considering the above points, I request your cooperation for the steps being taken by the Department to effectively implement the revolving credit programs conducted by the societies.

Summary of Key Procedures

Loan Disbursement Flowchart

1. Verify member subscription paid → Issue application form (Annexure I)
2. Collect applications → Present to General/Executive Committee
3. Committee selects beneficiaries → Prepare Summary Sheet (Annexure II)
4. Treasurer takes Summary Sheet to RDO for approval
5. After approval → Prepare payment voucher
6. Beneficiary signs voucher → Receive loan funds

Loan Recovery Flowchart

1. Collect installment from beneficiary → Issue official receipt
2. Record in Member Loan Register (Annexure III) - per beneficiary page
3. Deposit all collections in bank account by month end
4. Prepare Monthly Recovery Report (Annexure IV)
5. Submit report with bank book, receipt book, register to RDO by 5th of following month
6. RDO/Development Officer verifies and signs register

Required Registers and Forms

Additional Required Documents

• Payment Voucher Book
• Official Receipt Book (with carbon copies)
• Bank Passbook

Treasurer Incentive Conditions

• Maximum 20% of interest income (or percentage decided by society)
• Monthly report must be submitted by 5th of following month
• Must obtain written permission from RDO
• Maintain small register (about 3 pages) for tracking
• Incentive is for loan recovery task performance

Responsibilities

Treasurer's Responsibilities:

• Verify subscription payment before issuing application forms
• Maintain all loan registers accurately
• Issue receipts for all recoveries
• Deposit all collections in bank account monthly
• Submit monthly reports with all supporting documents by 5th
• Obtain proper approvals before disbursement

Rural Development Officer's Responsibilities:

• Verify subscription status when approached
• Approve loan disbursements after checking Summary Sheets
• Scrutinize monthly reports and registers
• Sign registers after verification
• Issue written permission for treasurer incentives
• Provide guidance on proper procedures

These guidelines supersede any previous instructions on revolving credit operations and must be strictly followed by all societies.

S. Srijeyanthan
Director
Department of Rural Development
Northern Province

Distribution List

1. Secretary, Ministry of Rural Development, Northern Province – for information.
2. District Secretary (Government Agent) – for information.
3. Divisional Secretary – for information and necessary action.
4. District Rural Development Officer – for information and implementation.