The genesis of Lead Bank Scheme (LBS) can be traced to the Study Group headed by Prof. D. R. Gadgil (Gadgil Study Group) on the organisational framework for implementation of the social objectives, which submitted its report in October 1969. The Study Group drew attention to the fact that commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation. The Study Group, therefore, recommended the adoption of an 'Area Approach' to evolve plans and programmes for the development of an adequate banking and credit structure in the rural areas.
A Committee of Bankers on Branch Expansion Programme of public sector banks appointed by Reserve Bank of India under the Chairmanship of Shri F. K. F. Nariman (Nariman Committee) endorsed the idea of area approach in its report (November 1969) recommending that in order to enable the public sector banks to discharge their social responsibilities, each bank should concentrate on certain districts where it should act as a 'Lead Bank'.
Pursuant to the above recommendations, the Lead Bank Scheme was introduced by Reserve Bank of India in December 1969. The Scheme aims at coordinating the activities of banks and other developmental agencies through various fora in order to achieve the objective of enhancing the flow of bank finance to priority sector and other sectors and to promote banks' role in overall development of the rural sector. For coordinating the activities in the district, a particular bank is assigned the lead bank responsibility of the district. The lead bank is expected to assume leadership role for coordinating the efforts of the credit institutions and Government.
In view of the number of changes that had taken place in the financial sector, the Lead Bank Scheme was last reviewed by the High Level Committee of the Reserve Bank of India in 2009.
The High Level Committee held wide ranging discussions with various stakeholders viz. State Governments, banks, development institutions, 4 academicians, NGOs, MIFIs etc. and noted that the Scheme has been useful in achieving its original objectives of improvement in branch expansion, deposit mobilisation and lending to the priority sectors, especially in rural/semi urban areas. There was overwhelming consensus that the Scheme needs to continue. Based on the recommendations of the Committee, guidelines were issued to SLBC convenor banks and lead banks for implementation.
