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Source — Source: ET ///Category — GS Paper 3 ///Published — 2026-02-21 ///Exam — Both Prelims and Mains ///Tags — Rapid Fire CA, Quick Facts For Prelims, GS Paper - 3 ///Source — Source: ET ///Category — GS Paper 3 ///Published — 2026-02-21 ///Exam — Both Prelims and Mains ///Tags — Rapid Fire CA, Quick Facts For Prelims, GS Paper - 3 ///

Source: ET · GS Paper 3

RBI to Revise Lead Bank Scheme (LBS)

The RBI has issued draft guidelines to revamp the Lead Bank Scheme, a district‑level mechanism introduced in 1969 to promote coordinated credit delivery and financial inclusion. Key proposals include strengthening State Level Bankers' Committees, Lead District Manager offices, and setting a 60% credit‑deposit ratio benchmark for rural and semi‑urban branches.

2026-02-21

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Source: ET

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Key Facts and Data Points

Introduction of LBS: December 1969.
Origin: Recommendations of the Gadgil Study Group and the Nariman Committee (1969).
Draft revision focus: Strengthening State Level Bankers' Committees (SLBCs) and Lead District Manager (LDM) offices.
Proposed Credit‑Deposit (CD) ratio benchmark: 60% for rural and semi‑urban branches nationwide.
Lead Bank: One commercial bank, usually a public sector bank, designated for each district.
Service Area Approach (SAA) (April 1989): Allocation of 15‑25 villages per branch to ensure planned development and avoid overlap.

Background and Context

The Lead Bank Scheme (LBS) is an institutional mechanism to promote coordinated banking development, priority sector lending, and financial inclusion at the district level through an "Area Approach."
It operationalises the concept of social banking, integrating developmental roles with commercial objectives of public sector banks.
The district serves as the basic unit for credit planning, initially excluding major metros (Mumbai, Kolkata, Chennai).
A Lead District Manager (LDM), an officer from the Lead Bank, oversees implementation and coordination with government agencies and development bodies.

Significance for India / Governance / Policy

Enhances credit flow to priority sectors such as agriculture, MSMEs, and weaker sections.
Improves coordination among banks, state governments, and development agencies, reducing credit gaps.
Supports the broader goal of financial inclusion and the RBI’s mandate of a stable, inclusive banking system.
Monitoring the CD ratio ensures a healthy asset‑liability structure for rural banking, aiding risk management.

Related Constitutional / Legal Provisions

The RBI’s power to issue such guidelines stems from the Reserve Bank of India Act, 1934.
The revision aligns with existing Priority Sector Lending (PSL) guidelines and other RBI circulars governing bank‑credit allocation.