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2. Lead Bank Scheme
 Study Group – Chairman – Dr. D.R.Gadgil appointed
under the National Credit Council – recommended
‘Area Approach’ for unbanked districts.
 Report submitted in October 1969
 Conclusions:
 Nationalized banks provide 83% of total credit
 Banking facilities not available to 617 of 2700 towns
 5000 villages not covered by commercial banks
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3. Lead Bank Scheme
 Prof. Gadgil recommended:
 Banks should provide integrated banking facilities in
unbanked areas
 Adoption of ‘Area Approach’ –in unbanked areas- each
bank should adopt an area
 Help agriculture and SSI
 ‘District’ identified as the smallest geographical unit
for the scheme
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4. Lead Bank Scheme
 Narsimhan Committee appointed by RBI
 Same recommendations
 Nationalized banks should act as a ‘Lead Bank’
 Lead Bank should develop a district
 LEAD BANK SCHEME:
 336 Districts to be distributed between nationalized
banks ( 14 + SBI + 7 Sub. Of SBI)
 Scheme applicable to all districts except the Metro.
Cities of Mumbai Kolkata Chennai and Un.Terr. Of
Delhi, Pondicherry & Goa
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5. FUNCTIONS
 Survey resources and development of banking in the
area
 Survey the dependence on money lenders by industrial
units, farms etc
 Survey the facilities for storing (fertilizers &
agricultural inputs), marketing, credit facilities for
marketing
 Offer training to staff for advice to small borrowers &
farmers in priority sectors
 Assist other agencies and involve co-op banks, RRB’s,
SFC’s, KVIB, NABARD
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6.  Banks were allotted Districts on the basis of :
 1.The capacity of the Bank – popularity of the bank in
the area
 2.Geographical continuity of the Districts forming
clusters
 3. If possible each Bank to operate in more than 1 State
 4. If possible to have more than 1 Bank in one State
 Lead Banks were to first undertake an impression
survey of whole District.
 Then a detailed survey regarding saving potential,
credit requirement, credit gap or surplus
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7. Advantages from the Scheme
 Spread the availability of banking facilities all over the
country
 Inter link the Commercial and Co-operative banks
 More effective Branch Expansion
 Better relationship between Govt. and Banks
 Integration of credit activities of banks
 Bottlenecks in the development of a District can be
located and removed
 Lead Bank Scheme would assist in implementation of
the District Plan
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8. District Credit Plans (DCP’s)
 First implemented in 1974
 DCP –consists of technically & economically viable
schemes which can be taken up for financing
 It is a plan of bankable schemes in agriculture, industry
and services sectors of the District
 The schemes can be taken up by different financial
institutions in the district
 Implement the programme in collaboration with other
institutions
 Monitor progress & evaluate progress in achieving targets
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9. Progress of Lead Bank Scheme
 By 1974 – 90% of geog areas in Assam, Bihar,
W.Bengal, Orissa, M.P., U.P covered
 2 Study Groups appoinetd by RBI in Gujurat &
Maharashtra concluded:
 A)Lead Banks were successful in identifying potential
areas for new branches
 B) Formulation & implementation of DCP’s was slow
 They suggested preparation of Annual Action Plans
followed by Annual Credit Plans (ACP’s)
 By mid nineties the Lead Bank Scheme covered 493
Districts
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10. Problems – Lead Bank Scheme
 Confusion regarding the concept of ‘Lead Bank’ especially
for opening branches-ambiguous scope & objectives
 Co-ordination & Effective Functioning between banks &
F.I’s – not just providing finance
 Problems in allotment of Districts
 Expertise- knowledge on the district, agriculture, projects
etc
 Problems in preparation and uniformity of DCP’s
 Other Infrastructure
 Did not consider role of co-operatives – imp source of
institutional finance
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11. Service Area Approach (SAA)
 1980’s shortcomings of LBS identified
 SAA introduced in 1989
 Every branch and RRB allotted 15 to 25
districts=Service Area
 Survey of villages, then village-wise credit plans
prepared
 Credit plan to be monitored by Lead Bank
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12. Service Area Approach (SAA)
 Advantages of SAA:
 Branch can concentrate on development of a
village
 Duplication can be avoided
 Lending can be organized and planned
 End- use better controlled
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13.  State Level Bankers’ Committee (SLBC) formed with
Steering Committee & Co-ordination Committee for
State Level
 District Consultative Committee, Review Committee &
Standing Committee at District Level
 Block Level Bankers’ Committee (BLBCs) formed
 BLBCs co-ordinate credit institutions and
development agencies, help implementation of credit
plans
 Today banks have to open 25% of their branches in a
year, in unbanked rural areas
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