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A Critical Evaluation of the Lead Bank Scheme
The working of the Lead Bank Scheme has been reviewed at frequent
intervals by the RBI by conducting sample studies (as in 1981) or appointing
review committees (as in 1982-83). It has been a constant endeavour on the part
of RBI and NABARD to improve the functioning of the Lead Bank arrangement
but the achievements have always left much to be desired. However, landable
the objectives may be the machinery at the banks’ level as well as at the level of
the public administration, has generally failed to rise to the occasion.
And then we have the deterioration in the social role of banks in the
form of reduced branch banking in rural areas and substantial reductions
in the credit shares of agriculture and other informal sectors in the 1990s.
Social banking had received a setback by the end of that decade. As the NIBM
study (N.B. Shete, NIBM December 2004) opined, “the 1990s was a lost decade
for rural credit and agricultural sector, mostly because of the application of
prudential norms” (p.255).
Around that time, NIBM undertook the study to take a fresh look
at the whole Lead Bank Scheme in a consultative manner at three stages:
(i) a comprehensive questionnaire sent to about 540 Lead Development
Managers/Lead Bank Officers, for which 333 replied; (ii) a separate schedule
for GMs of priority sector credit in public sector banks, for which 19 GMS
responded; and (iii) a back-to back programme to share the findings of the
study and for improving the working of the LBS and the role of LBMs/LBOs;
in all 54 participants from RBI, NABARD and commercial banks attended the
programme.
The conclusion of the study was unequivocal: “The programme is very
much relevant for the present-day needs. The decision-makers may seriously
consider the views expressed on the programme for making LBS more effective”
(p.266).
The study argued that various committees like Block Level Bankers
Committee, District Coordination Committee and District Review Committee
seldom function with all seriousness. The Lead District Manager who is
responsible for preparing the credit plan and who monitors the progress is
burdened with a number of other responsibilities like mobilizing deposits.
He should only be given the task of coordinating the preparation and
implementation of credit plans, given more authority and made accountable.
In fact, he should be deemed to have been deputed to the Reserve Bank of
India (RBI) and given functional freedom and the functionaries from line
departments like agriculture, horticulture and animal husbandry responsible
