The Group Recognition Test (GRT) is a method used to assess the creditworthiness, social cohesion, and repayment capability of members in a Joint Liability Group (JLG) or Self-Help Group (SHG) before approving a group loan. It is conducted by banks or microfinance institutions (MFIs) to ensure that the group members understand their responsibilities and are capable of handling credit responsibly.

Objectives of Group Recognition Test (GRT):

1. Assess Group Understanding: Ensures that all members understand the joint liability concept—that they are responsible for each other’s loan repayment.
2. Evaluate Financial Discipline: Checks if members have a history of timely repayments and financial stability.
3. Verify Genuine Borrowers: Ensures that applicants are not borrowing excessively from multiple sources (over-indebtedness).
4. Promote Social Cohesion: Examines whether the group has strong internal trust and cooperation.
5. Assess Loan Utilization: Verifies that the loan will be used for productive purposes like agriculture, small businesses, or income-generating activities.

Process of GRT:

✅ Conducted by a bank official or MFI representative.
✅ Members are interviewed collectively and individually.
✅ Questions focus on their understanding of loan terms, repayment schedules, and mutual liability.
✅ Decision is made whether to approve the group for a loan.

Benefits of GRT:

✔ Reduces the risk of loan defaults.
✔ Ensures financial literacy among borrowers.
✔ Encourages group accountability and responsible borrowing.