Introduction: Reserve Bank of India introduced the Lead Bank Scheme in December 1969.
Objective of Lead Bank Scheme: The Lead Bank Scheme aims to serve the following two purpose:
- enhancing the flow of bank finance to the priority sector and other sectors and
- to promote the role of banks in the overall development of the rural sector.
For these objectives, there is a need for coordinating the activities of banks and other developmental agencies through various forums like Block Level Bankers’ Committee (BLBC), District Consultative Committee (DCC) and State Level Bankers’ Committee (SLBC). All these coordination work is managed by the lead bank.
How Lead Bank Scheme works: The Reserve Bank of India assigned ‘Lead Bank’ responsibility of the district to a particular bank for coordinating the activities in that district. The Lead Bank is expected to assume a leadership role for coordinating the efforts of the credit institutions and the Government.
History and basis of the introduction of Lead Bank Scheme
A Study Group, headed by Prof. D. R. Gadgil (Gadgil Study Group), recommended the adoption of an ‘Area Approach’ to evolve plans and programmes for the development of adequate banking and credit structure in the rural areas. This was due to the fact that commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation.
Committee of Bankers on Branch Expansion Programme of Public Sector Banks under the Chairmanship of Shri F. K. F. Nariman (Nariman Committee) recommended that in order to enable the Public Sector Banks to discharge their social responsibilities, each bank should concentrate on certain districts where it should act as a ‘Lead Bank’.
Latest review of Lead Bank Scheme– The Lead Bank Scheme was last reviewed in the year 2009. The High-level committee that reviewed the scheme was headed by Smt. Usha Thorat, the then Deputy Governor of the Reserve Bank of India.
Changing role of Lead Banks with changing time
With the advancement of technology and the introduction of various new scheme by the Government, the Lead Banks are required to do much more than its basic function. Some examples are:
Financial inclusion– Over the years, the focus of the Lead Bank Scheme has shifted to inclusive growth and financial inclusion. SLBC Convenor Banks / Lead Banks are advised to focus attention on the need for achieving 100% financial inclusion through penetration of banking services in the rural areas.
Roadmap for providing banking services in unbanked villages– In November 2009, a roadmap to provide banking services in villages with population more than 2000 was rolled out. All the identified villages have been provided with banking services through branches, business correspondents or through other modes such as ATMs and mobile vans.
Roadmap for opening brick and mortar branches in villages with population more than 5000 without a bank branch of a scheduled commercial bank– SLBC Convenor Banks were advised to identify villages with population above 5000 without a bank branch of a scheduled commercial bank in their State and allot these villages among scheduled commercial banks (including Regional Rural Banks) for opening of branches.
Direct Benefit Transfer– Direct Benefit Transfer (DBT) was rolled out by the Government of India in selected districts in January 2013. It was expanded to other districts subsequently. SLBC Convenor Banks were advised to co-ordinate with the Government authorities to implement DBT. Banks were advised to include the status of the roll-out of DBT as a regular agenda item for discussion in SLBC meetings as part of Financial Inclusion/Direct Benefit Transfer (DBT) implementation.
Doubling of Farmers’ Income by 2022– The Lead Bank Scheme, which ensures inter-departmental/governmental coordination in the financial sector, should, therefore, be leveraged to further the objective of doubling farmer’s income by 2022.
Source: RBI
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