Lead bank scheme

 Lead Bank Scheme 

 

The genesis of the Lead Bank Scheme (LBS) can be traced to the Study Group 

headed by Prof. D. R. Gadgil (Gadgil Study Group) on the Organizational 

Framework  for Implementation of the Social Objectives, which submitted its report 

in October  1969. The Study Group drew attention to the fact that commercial 

banks did not have adequate presence in rural areas and also lacked the required 

rural orientation. The  Study Group, therefore, recommended the adoption of an 

'Area Approach' to evolve  plans and programmes for the development of an 

adequate banking and credit  structure in the rural areas.  

 

A Committee of Bankers on Branch Expansion Programme of Public Sector Banks  

(PSBs) appointed by the Reserve Bank of India under the Chairmanship of Shri F. K.  

F. Nariman (Nariman Committee) endorsed the idea of an ‘Area Approach’ in its 

report  (November 1969), recommending that in order to enable the PSBs to 

discharge their  social responsibilities, each bank should concentrate on certain 

districts where it  should act as a 'Lead Bank'.  

 

Pursuant to the above recommendations, the LBS was introduced by the Reserve  

Bank of India (RBI) in December 1969. 

 

The Lead Bank Scheme aims at coordinating the activities  of banks and other 

developmental agencies through various fora to achieve the objective of 

enhancing the flow of bank finance to the priority sector and other sectors and to 

promote banks' role in the overall development of the rural sector.  

 

For coordinating the activities in a district, a particular bank is assigned ‘Lead Bank’ 

responsibility of the district. The Lead Bank is expected to assume a leadership role  

for coordinating the efforts of the credit institutions and the Government.  

 

  

In view of the several changes that had taken place in the financial sector, the LBS 

was reviewed by the High Level Committee headed by Smt. Usha Thorat, former 

Deputy Governor of the Reserve Bank of India in 2009. There was overwhelming 

consensus that LBS needs to continue.  

 

Envisaging greater role for private sector banks (PvSBs), Lead Banks were  advised 

to ensure that PvSBs are more closely and actively involved in the  implementation 

of the LBS, by leveraging on Information Technology and bringing in  their 

expertise in strategic planning. They were also advised to involve themselves in  

preparation as well as implementation of the District Credit Plan (DCP). 

 

Further, RBI constituted a “Committee of Executive Directors” of the Bank to study  

the efficacy of the scheme and suggest measures for its improvement. Based on 

the Committee’s recommendations and feedback received from various 

stakeholders,  certain ‘action points’ were issued to SLBC Convenors/Lead Banks 

and NABARD on  April 6, 2018. 

 

Block Level Bankers’ Committee (BLBC) is a forum for achieving coordination 

between  credit institutions and field level development agencies at the block level.  

The forum prepares and reviews the implementation of the Block Credit Plan and 

resolves operational issues in the implementation of the credit programmes of 

banks. The Lead District Manager (LDM) of the district is the Chairman of the BLBC. 

All the banks operating in the block including Small Finance Banks (SFBs), Wholly 

Owned Subsidiaries (WOS) of Foreign Banks, Regional Rural Banks (RRBs), District 

Central Co-operative Banks (DCCBs), Block Development Officer, technical officers 

in the block such as extension officers for agriculture, industries and co-operatives 

are members of the Committee. BLBC meetings are held at quarterly intervals.  

 

District Consultative Committees (DCCs) were constituted in the early seventies as 

a common forum at the district level for bankers as well as Government agencies/ 

departments to facilitate coordination in implementing various developmental 

activities  under the LBS. 

 

Under LBS, planning starts with identifying block-wise/ activity-wise potential 

estimated for various  sectors.  

  

 

Potential Linked Credit Plans (PLPs) are a step towards decentralized credit 

planning with the basic objective of mapping the existing potential for 

development through bank credit. While preparing the PLPs, the focus must be on 

identifying processes and projects that: 

 

a. reduce carbon foot-print, 

b. prevent overuse of fertilizers, 

c. ensure efficient utilisation of water, and  

d. address agricultural pollution issues. 

 

A pre-PLP meeting is convened by the LDM during June every year. 

 

The preparation of PLP for the next year is to be completed by August every year. 

 

District Level Review Committee (DLRC) meetings are chaired by the District 

Collector and attended by members of the DCC. Public Representatives, i.e., Local 

MPs/MLAs/ Zilla Parishad Chiefs are also invited to these meetings. The DLRC 

meetings should be convened by the Lead Banks at least once in a quarter. 

 

The LDM should convene a quarterly public meeting at various locations in the 

district, in coordination with the LDO of RBI, banks having presence in the area and 

other  stakeholders to generate awareness on the various banking policies and 

regulations  relating to the common person, obtain feedback from the public and 

provide grievance   redressal to the extent possible at such meetings or facilitate 

approaching the appropriate machinery for such redressal. 

 

The State Level Bankers’ Committee (SLBC) was constituted in April 1977, as an 

apex inter institutional forum to create adequate coordination machinery in all 

States, on a uniform basis for development of the State. SLBC is chaired by the 

Chairman/ Managing Director/ Executive Director of the Convenor Bank. SLBC 

meetings are required to be held regularly at quarterly intervals. 

  

Service Area Approach (SAA)  introduced in April 1989 for planned and orderly 

development of rural and semi-urban areas was applicable to all SCBs including 

RRBs. Under SAA, each bank branch in a rural or semi-urban area was designated 

to serve an area of 15 to 25 villages and the branch was responsible for meeting 

the needs of bank credit of its service area. The primary objective of SAA was to 

increase productive lending and forge effective linkages between bank credit, 

production, productivity and increase in income levels. 

 

The SAA scheme was reviewed in December 2004 and it was decided to dispense 

with the restrictive provisions of the scheme, while retaining the positive features 

of the SAA, such as, credit planning and monitoring of the credit purveyance.  

 

Accordingly, under SAA, the allocation of villages among the rural and semi-urban  

branches of banks were made not applicable for lending except under Government  

Sponsored Schemes. Thus, while the commercial banks and RRBs are free to lend 

in any rural and semi-urban area, the borrowers have the choice of approaching 

any branch for their credit requirements.  

 

Credit Deposit Ratio (CD Ratio) of Banks in Rural and Semi-Urban Areas Banks 

have been advised to achieve a CD Ratio of 60 percent in respect of their rural and 

semi-urban branches separately on an All-India basis. While it is not necessary that 

this ratio should be achieved separately, branch-wise, district-wise or region-wise, 

banks should, nevertheless, ensure that wide disparity in the ratios between 

different  States/ Regions is avoided to minimise regional imbalance in credit 

deployment. 

(Source : RBI’s Master Circular dated 3 April 2023)

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