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Need for Reinvigorating the Lead Bank Scheme for
Integrating the Processes of Financial Inclusion with
those of Development Plans for Inclusive Growth
The Genesis
The origin of the Lead Bank Scheme can be traced to the “Area Approach”
recommended by the Study Group on the
Organisational Framework for the
Implementation of the Social Objectives
, headed by Prof. D.R. Gadgil, way
back in October 1969, for evolving plans and programmes for the development
of an adequate banking and credit structure in the rural areas. This was soon
followed up by
A Committee of Bankers on Branch Expansion Programme
of Public Sector Banks
under the Chairmanship of Mr. F.K.F. Nariman, which
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” (Nariman Committee Report of 1969).
Accordingly, the Lead Bank Scheme, as an important institutional
mechanism for building the rural banking architecture, was introduced by the
RBI in December1969. The Scheme emphasized making specific banks in each
district the key instruments of local development by entrusting them with the
responsibility of locating growth centres, assessing deposit potential, identifying
credit gaps and evolving a co-ordinated approach to credit deployment in each
district, in concert with other banks and credit agencies.
Over time the functioning of the Lead Bank framework passed through
many stages. The institution of Service Area Approach (SAA) to rural lending,
the Lead Bank Officer being given the responsibility of preparing the district
credit plans (DCP), the setting of District Consultative Committees, State
Level Bankers’ Committees and Block Level and many other consultative
committees, NABARD being entrusted with the task of planning, coordinating
and monitoring the credit programmes of banks and cooperatives as the sole
agency at the district level and in turn, NABARD being called upon by the RBI
in October 1989 to set up district level offices in all the districts in the country,
and finally, dispensing with the system of service area approach in December
2004 and the Annual Credit Plan for each district being prepared based on
Potential-Linked Plans (PLPs) drawn up by NABARD since 1989 with stressing
the need for dovetailing the District Credit Plan (DCP) with the Development
Plan of the district – have all been steps taken to striving towards an effective
spread of branch network and fulfilling the credit aspirations of the rural
community.
