LEAD BANK SCHEME (LBS)

NEWS: The Reserve Bank of India (RBI) has released draft guidelines to revise the Lead Bank Scheme (LBS), aiming to streamline its operations, strengthen coordination mechanisms, and enhance its effectiveness

ABOUT

• RevisionàFocuses on strengthening the State Level Bankers’ Committees (SLBCs) and Lead District Manager (LDM) officesà better coordination among banks, government bodies, and development agencies.
• Banksàmust monitor the CD ratio, with a draft benchmark set at 60% across rural and semi-urban branches nationwide.

Lead Bank Scheme

• Introduced by RBI in December 1969
• Designed to promote coordinated banking development, priority sector lending, and financial inclusion at the district level through an “Area Approach.”
• Originated from the recommendations of two 1969 committees:
  • The Gadgil Study Group
  • The Nariman Committee
• Launched to operationalize the concept of “social banking,” integrating developmental roles with commercial objectives for public sector banks.
• Enhance the flow of bank credit to priority sectors

Key Features

• The districtà serves as the primary unit for credit planning
• One commercial bank (usually public sector) is designated by the RBI àLead Bank for each district.
• Lead District Manager (LDM)à A dedicated officer from the Lead Bank oversees implementation

Service Area Approach (SAA)

• Introduced in April 1989
• An evolution of the Area Approach.
• It assigned specific clusters of villages (15-25 per branch) to individual bank branches to ensure planned development, prevent overlap, and avoid under-coverage in lending.