Lead Bank Scheme: All You Need to Know

INTRODUCTION

The National Credit Council was set up in Dec-1967 to regulate the priorities of bank credit among various sectors of the economy. The National Credit Council appointed a study group on the administrative context for the implementation of social objectives in Oct-1968 under the Chairmanship of Prof. D R Gadgil. The study committee found the following points. Report was submitted on Oct-1969.

• The nationalized banks provide 83% of total credit.
• Out of 2700 towns banking facilities are available only in 617 towns.
• 5000 villages not covered by Commercial banks.

Prof. D R Gadgil committee recommended the following points.

• Banks should provide integrated banking facilities in unbanked areas.
• Adoption of ‘Area Approach’ – in unbanked areas –each bank should adopt an area.
• Help Agriculture & Supplemental Security Income (SSI).
• ‘District’ identified as the smallest geographical unit for the scheme.

OBJECTIVES

• Eradication of unemployment and under employment.
• Considerable rise in the standard of living for the deprived of the poor.
• Provision of some of the basic needs of the people who belong to poor sections of the society.

FUNCTIONS

• To analysis the resources & potential for banking development by identifying unbanked centers in the allotted districts.
• To identify the industrial & commercial units which do not have bank accounts or depend mainly on money lender.
• To identify & study local problems.
• To set up branches in a phased manner.
• To keep contacts & liaison regularly with government & semi-government agencies.
• To provide assistance to the primary lending agencies.

Advantages from the scheme

• Spread the availability of banking facilities all over the country.
• Interlink the commercial & co-operative banks.
• More effective branch expansion.
• Better relationship b/w government & banks.
• Integration of credit activities of banks.
• This scheme would assist in implementation of District Plan.

District Credit Plans (DCP’s)

• It was implemented in 1974.
• It consists of technically & economically viable schemes which can be taken up for financing.
• It is a plan of bankable schemes in agriculture, industry & services sectors of the district.
• Implement the program in collaboration with other institutions.
• Monitor progress & evaluate progress in achieving targets.

Progress of Lead Bank Scheme

By 1974 –90% of geographical areas in Assam, Bihar, West Bengal, Orissa, Madhya Pradesh, Uttar Pradesh was covered.

The study committee appointed by RBI in Gujarat & Maharashtra concluded the following points.

• Lead Banks were successful in identifying potential area for new branches.
• Formulation & implementation of DCP’s was slow.
• They suggested preparation of Annual Action Plans followed by Annual Credit Plans (ACP’s).
• By mid 90s, the lead bank scheme covered 493 districts.

PROBLEMS

• There is a confusion regarding the concept of ‘Lead Bank’ especially for opening branches –ambiguous scope & objectives.
• Lag in Co-ordination & effective functioning b/w banks & financial institutions.
• Problems in allotment of Districts.
• Problems in preparation & uniformity of DCP’s.
• Did not consider the role of Co-operatives which is the important source of institutional finance.

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