Q. The Service Area Approach was implemented under the purview of

  • Integrated Rural Development Programme
  • Lead Bank Scheme
  • Mahatma Gandhi National Rural Employment Guarantee Scheme
  • National Skill Development Mission

Answer: (b) Lead Bank Scheme

Notes:
  • Service area approach (SAA) is a developed version of the ‘area approach’ structure of the Lead Bank Scheme.
  • Under SAA plan each commercial bank / RRB branch in a rural and semi-urban area is designated to serve 15 to 25 villages for the planned and orderly development of the areas.
  • Under the Lead bank Scheme, the service area approach was introduced in 1989 for the planned and orderly development of rural and semi-urban areas.
Lead Bank Scheme
  • The Lead Bank Scheme is a scheme which aims at providing adequate banking and credit in rural areas through an ‘service area approach’, with one bank assigned for one area. It was introduced in 1969.
  • On the recommendation of the Gadgil Study Group and Banker’s Committee, the Scheme was introduced by RBI. The committees found that the rural areas were not able to enjoy the benefits of banking.  Also, that the commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation which was hindering the growth of rural areas.
  • To address this issue it was decided that some areas or sector will be given to the banks whether private or public in which that bank had to play a lead role in providing financial services to the people.
  • D.R.Gadgil study group recommended the adoption of an ‘AREA APPROACH’ to evolve plans and programs for the development of adequate banking and credit structure in rural areas.
  • 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.
  • NARIMAN  committee appointed by RBI endorsed the ideas of area approach in its report recommended that each bank should concentrate on certain districts where it can act as ‘LEAD BANK’.
  • Pursuant to the above recommendations, the lead bank scheme was introduced by RBI in December 1969.
  • The lead bank scheme assigned lead role to individual banks in the public sector and private sector for the districts allotted to them.
  • A bank having a relatively large network of branches in rural areas of given districts and having adequate financial and manpower was generally been entrusted with the lead responsibility for that district.
  • The lead bank act as a leader for coordinating the efforts of all credit institutions to increase the flow of credit to agriculture, small scale industries, and other areas.
  • Objectives of the Lead Bank Scheme:
    • Identify those regions which are unbanked and underbanked in districts and also evaluate their physiographic, agro climatic end Socio-economic conditions through economic survey.
    • Help in removing regional imbalances through appropriate credit deployment.
    • Extend banking facilities to unbanked areas
    • Identify economically viable and technically feasible schemes.
    • Bring structural and procedural changes in banking sector.
    • Develop co-operation amongst financial and non-financial institutions.