Previous Year Question

The Service Area Approach (SAA) was introduced in April 1989 for the orderly and planned expansion of institutional credit in rural and semi-urban areas. It formed part of the credit-planning framework under the Lead Bank Scheme.

Under this approach, each rural or semi-urban bank branch was assigned a specified group of villages as its service area. The branch was expected to:

• survey economic activities and credit potential within the assigned area;

• identify households and enterprises requiring credit;

• prepare credit plans for agriculture, small industries and other productive activities;

• monitor the disbursement and utilisation of credit; and

• link bank credit with production, productivity and income expansion.

The arrangement applied to rural and semi-urban branches of Scheduled Commercial Banks and Regional Rural Banks. A branch was generally assigned approximately 15 to 25 villages.

The Lead Bank Scheme itself was introduced in December 1969. Under it, a Lead Bank was assigned to each district to coordinate banking and credit-related development. The Service Area Approach extended this district-level framework to the branch and village levels.

In 2004, the Service Area Approach was liberalised, removing the rigid restriction that tied a borrower to only one designated branch. However, it continued to have institutional relevance for rural credit planning and monitoring of government-sponsored programmes.