Context
Recently, the Reserve Bank of India (RBI) released a comprehensive draft circular to overhaul the Lead Bank Scheme (LBS) to align it with the National Strategy for Financial Inclusion 2025–30.
1. Genesis and Evolution of Lead Bank Scheme
- Introduction: The Lead Bank Scheme was introduced by the Reserve Bank of India in December 1969.
- Aim: To coordinate banks and development agencies to increase bank credit flow to priority sectors and strengthen banks’ role in rural development.
- Gadgil Study Group (1969): It recommended the “Area Approach” to evolve coordinated plans for banking and credit structure in rural areas.
- Nariman Committee (1969): A Committee of Bankers headed by F.K.F. Nariman endorsed this approach, suggesting that each district be allotted to a specific “Lead Bank” to act as a pace-setter.
- Usha Thorat Committee (2009): This panel recommended the revitalization of the scheme to focus on 100% financial inclusion and strengthen the role of the Lead District Manager.
2. Core Mechanism: The Area Approach
- District as a Unit: Under the scheme, a district is the primary unit for planning and coordination of banking activities.
- Consortium Leader: One commercial bank (Public or Private) is designated as the Lead Bank for a specific district.
- Non-Monopoly Role: The Lead Bank does not have a monopoly over banking business in the district; rather, it acts as a coordinator for all financial institutions (Commercial Banks, RRBs, Co-operatives) and government agencies.
3. Institutional Architecture
The scheme operates through a hierarchy of committees to ensure coordination between banks and the government:
| Level | Committee | Chairperson | Frequency |
| State Level | State Level Bankers’ Committee (SLBC) | CMD/Executive Director of Convenor Bank | Quarterly |
| District Level | District Consultative Committee (DCC) | District Collector | Quarterly |
| District Level | District Level Review Committee (DLRC) | District Collector (includes MPs/MLAs) | Half-yearly |
| Block Level | Block Level Bankers’ Committee (BLBC) | Lead District Manager (LDM) | Quarterly |
Key Functionary: Lead District Manager (LDM)
- The Lead Bank appoints a senior officer as the LDM to oversee the implementation of the District Credit Plan (DCP).
- The LDM acts as a liaison between the banking sector and the district administration to resolve operational bottlenecks.
4. Key Concepts for Prelims
- Service Area Approach (SAA): Introduced in 1989 as a part of LBS, it assigned a group of villages to a specific bank branch to ensure planned credit deployment.
- District Credit Plan (DCP): It is an annual plan prepared by the Lead Bank indicating the sector-wise and block-wise credit targets for the district.
- Credit-Deposit (CD) Ratio: It measures the credit disbursed by banks in a region relative to the deposits mobilized there. RBI monitors this to ensure that rural deposits are reinvested locally rather than being diverted to metropolitan areas.
Q1. With reference to the Lead Bank Scheme (LBS) in India, consider the following statements:
I. The scheme was introduced in 1969 based on the recommendations of the Narasimham Committee on Banking Sector Reforms.
II. The Lead Bank of a district enjoys exclusive rights to conduct government banking business and provide credit within that specific district.
III. The State Level Bankers' Committee (SLBC) is an inter-institutional forum chaired by the Governor of the Reserve Bank of India.
IV. As per the recent 2026 draft guidelines, banks are required to maintain a minimum Credit-Deposit (CD) ratio of 60% for their rural and semi-urban branches.
Which of the statements given above is/are correct?
A. I and III only
B. IV only
C. II and IV only
D. I, II, and IV only
Solution: B
• STATEMENT I INCORRECT: The Lead Bank Scheme was based on the recommendations of the Gadgil Study Group and the Nariman Committee, not the Narasimham Committee (which came later in 1991/1998).
• STATEMENT II INCORRECT: The Lead Bank does not have a monopoly or exclusive rights. It only acts as a coordinator or consortium leader for all banks in the district.
• STATEMENT III INCORRECT: The SLBC is chaired by the Chairman/Managing Director/Executive Director of the Convenor Bank of that state, not the RBI Governor.
• STATEMENT IV CORRECT: The 2026 RBI draft guidelines explicitly mandate a 60% CD ratio for rural and semi-urban branches to ensure adequate local credit deployment.
