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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