Study Notes

Lead Bank Scheme

Lead Bank Scheme

Genesis of Lead Bank Scheme (LBS)

 Gadgil Study Group

o In October 1969, Study Group headed by Prof. D. R. Gadgil (Gadgil Study
Group) on the Organizational Framework for the Implementation of the Social
Objectives 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
o The study observed that the Commercial banks did not have adequate presence
in rural areas and also lacked the required rural orientation

 Nariman Committee
o In November 1969, a Committee of Bankers on Branch Expansion Programme
of Public Sector Banks under the Chairmanship of Mr. F. K. F. Nariman
endorsed the idea of an ‘Area Approach’ in its report
o It recommended that each nationalized bank be made 'Lead Bank' for certain
districts wherein they will be responsible to discharge the social responsibilities
in that district.

 Introduction of the Lead Bank Scheme

o Lead Bank Scheme was introduced by RBI in December 1969
o A particular bank which is assigned as the ‘Lead Bank’ acts as a consortium
leader that coordinates the efforts of the banking institutions and the
Government in that district to ensure financial inclusion and banking penetration
in that district.

 Usha Thorat chaired High level committee

o In 2009 it reviewed the scheme and recommended its continuance to further
financial inclusion objectives
o Greater role of private sector banks in LBS
o Enhancing the business correspondent/ business facilitator model
o Banks are required to open at least 25% of banking outlets in unbanked
rural areas

 Committee of Executive Directors – 2018

o The scheme was reviewed again for further improvement and actionables were
taken in 2018

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 Lead Bank Scheme

Fora / Structure under the Lead Bank Scheme

Lead Bank Sceme

Block Level District State Level

Bankers' Consultative Bankers'
Committee Committee Committee

1. Block Level Bankers’ Committee (BLBC)

Purpose Forum for achieving coordination between credit institutions and field level development
agencies at the block level
Chairman Lead District Manager (LDM) of the district
Members All the banks operating in the block including the Small Finance Banks, the District
Central Co-operative Banks, RRBs, Block Development Officer, technical officers in the
block
Meetings o Quarterly
o District Development Manager (DDM) of NABARD advised to attend the meeting
o Lead District Officer (LDO) of RBI selectively attends the BLBC meetings

2. District Consultative Committee (DCC)

Purpose Forum at the district level for bankers as well as Government agencies/ departments to
facilitate coordination in implementing various developmental activities
Chairman District Collector
Members RBI, NABARD, all the commercial banks including Small Finance Banks in the district,
co-operative banks including the District Central Cooperative Bank (DCCB), RRBs,
Payments Banks various State Government departments and allied agencies
Convenor Lead District Manager (LDM)
Meetings o At quarterly intervals
o Agenda may include:
 Review of progress under financial inclusion plan
 Review of flow of credit to priority sector and weaker sections
 Doubling of Farmers’ Income by 2022
 Progress under SHG - bank linkage
o District Level Review Committee (DLRC) Meeting may also be held quarterly, in
which public representatives like MP/MLA are also invited
o DCC and DLRC meetings should not be held simultaneously

3. State Level Bankers’ Committee (SLBC)

Constitution April 1977
Purpose Apex inter-institutional forum to create adequate coordination machinery in all States, on
a uniform basis for development of the State
Chairman Chairman/ Managing Director/ Executive Director of the Convenor Bank
Members Representatives of commercial banks including Small Finance Banks, RRBs, Payments
Banks, State Cooperative Banks, RBI, NABARD, heads of Government departments
Conduct At quarterly intervals
Convenor SLBC Convenor Bank of the State
Meeting To be held within 45 days from the end of the quarter

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Lead Bank Scheme

Implementation of Lead Bank Scheme

Preparation of Credit Plans

 Bottom-Up Approach - planning starts with identifying block wise/activity wise potential
estimated for various sectors

Monitoring the Performance of Credit Plans

At Block Level Block Level Bankers’ Committee (BLBC)

At District Level District Consultative Committee (DCC) & District Level
Review Committee (DLRC)
At State Level State Level Bankers’ Committee (SLBC)

Monitoring of LBS by RBI - Monitoring Information System (MIS)

 Annual Credit Plan (ACP) is to be prepared considering the categories of priority

sector
 The flowing statements are submitted to RBI:
o Statement for ACP target (LBS-MIS-I)
o Statement for disbursement and outstanding (LBS-MIS-II)
o ACP achievement vis-à-vis ACP target

Box 1: Lead Bank responsibility Status as of June 30, 2019

o 18 public sector banks and 1 private sector bank have been assigned Lead Bank
responsibility in 717 districts of the country by RBI
o The SLBC/ UTLBC convenorship of 29 States and 7 Union Territories has been
assigned to 14 public sector banks and 1 private sector bank (i.e. J&K Bank)

Advice to Banks – CD Ratio

 Credit Deposit Ratio (CD Ratio) of 60% in respect of their rural and semi-urban branches
separately on an All-India basis
 For addressing the low credit deposit ratios, Expert Group was constituted by the
Government of India which recommended that the CD Ratio of banks should be monitored
at different levels:

Institution/ Level Indicator

Individual Banks at Head Office Cu + RIDF
State Level (SLBC) Cu + RIDF
District Level Cs
Where,
Cu = Credit as per place of Utilization
Cs = Credit as per place of Sanction
RIDF = Total Resource support provided to States under RIDF

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Lead Bank Scheme

 Monitoring on the basis of CD Ratio:

District with CD ratio Monitoring by

<20 to be treated on a special footing
<40 Special Sub-Committees (SSCs) of the DCC
>40 and <60 existing system by the DCC

Service Area Approach (SAA)

Introduction April 1989

Purpose  Planned and orderly development of rural and semi-urban areas
 To increase productive lending and forge effective linkages between bank
credit, production, productivity and increase in income levels
Applicability All scheduled commercial banks including Regional Rural Banks
Scope  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.
Review  Done in December 2004
 Decided to dispense with the restrictive provisions of the scheme while
retaining the positive features of the 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 (borrowers have the choice of approaching any
branch for their credit requirements)

Others

Discontinuation Banks have been advised to do away with obtaining a ‘No Due Certificate’ from the
of requirement individual borrowers (including SHGs & JLGs) in rural and semi-urban areas for all
of No Due types of loans including loans under Government Sponsored Schemes
Certificate

 Credit history check through Credit Information Companies (CICs)

 Self-declaration or an affidavit from the borrower
Alternate
 CERSAI registration
Framework for
due diligence  Peer monitoring
to be used  Information sharing among lenders
 Information search (writing to other lenders with an auto deadline)

Lead Banks are advised to ensure the following:

 Work closely with NABARD in the preparation of Potential Linked Credit
Plans (PLPs) & Annual Credit Plans (ACPs) to achieve this objective
Doubling of
 Include ‘Doubling of Farmer’s Income by 2022’ as a regular agenda under
Farmers
the Lead Bank Scheme in various committee meetings
Income by 2022
 For the purpose of monitoring and reviewing the progress, Lead Banks may
use the benchmarks as may be provided by NABARD