RBI to Revise Lead Bank Scheme (LBS) | 21 Feb 2026

Source: ET

The Reserve Bank of India (RBI) has released draft guidelines to revise the Lead Bank Scheme (LBS), aiming to streamline its operations, strengthen coordination mechanisms, and enhance its effectiveness.

• Objective of Revision: The focus is on strengthening the State Level Bankers' Committees (SLBCs) and Lead District Manager (LDM) offices for better coordination among banks, government bodies, and development agencies.
• Monitoring Credit-Deposit (CD) Ratio: Banks must monitor the CD ratio, with a draft benchmark set at 60% across rural and semi-urban branches nationwide.

Lead Bank Scheme

• About: LBS, introduced by RBI in December 1969, is a key institutional mechanism designed to promote coordinated banking development, priority sector lending, and financial inclusion at the district level through an "Area Approach."
• Origin: It originated from the recommendations of two 1969 committees: the Gadgil Study Group (which advocated an "Area Approach") and the Nariman Committee (which endorsed it and recommended that banks adopt specific districts).
  • It was launched to operationalize the concept of "social banking," integrating developmental roles with commercial objectives for public sector banks.
• Core Objectives: Enhance the flow of bank credit to priority sectors (agriculture, MSMEs, weaker sections), coordinate efforts of banks and government agencies to address credit gaps, etc.
• Key Features: 
  • Basic Unit: The district serves as the primary unit for credit planning (excluding major metropolitan cities like Mumbai, Kolkata, and Chennai in early implementations).
  • Lead Bank: One commercial bank (usually public sector) is designated by the RBI as the Lead Bank for each district.
  • Lead District Manager (LDM): A dedicated officer from the Lead Bank oversees implementation.
• Service Area Approach (SAA): Introduced in April 1989, the SAA was an evolution of the Area Approach. It assigned specific clusters of villages (15-25 per branch) to individual bank branches to ensure planned development, prevent overlap, and avoid under-coverage in lending.