Previous Year Question
L.B.S. is one of the economic measures taken by the Government of India for financial inclusion. What is L.B.S. in this context?
Loan Banking Scheme
Lead Banking Scheme
Loan Banking System
Lead Breaking System
Correct Answer: B
Detailed Solution
LBS stands for Lead Bank Scheme. It was introduced by the Reserve Bank of India (RBI) in December 1969. Its primary objectives were to expand banking services in rural and semi-urban areas, improve the availability of institutional credit, and promote Financial Inclusion.
The scheme was introduced based on the recommendations of the D. R. Gadgil Study Group (1969) and the F. K. F. Nariman Committee (1969). The Gadgil Study Group recommended adopting an Area Approach in view of the inadequate presence of commercial banks in rural areas. The Nariman Committee supported this approach and suggested assigning development responsibilities to banks in specific areas.
Under the Lead Bank Scheme, one bank is assigned the responsibility of acting as the Lead Bank in each allocated district. This bank plays a major role in coordinating with other banks, financial institutions, and government departments operating in the district to prepare plans for expanding banking facilities and distributing credit.
The major functions of the Lead Bank Scheme are:
Expansion of Banking Services: Increasing access to banking services in rural and underserved areas.
Credit Planning: Assessing the credit requirements of agriculture, small industries, and other priority sectors.
Financial Inclusion: Expanding access to formal banking services for underserved households, small farmers, and micro-entrepreneurs.
Institutional Coordination: Establishing coordination among banks, government departments, and development institutions.
At the district level, the District Consultative Committee (DCC) is a major coordination forum under this scheme. It is chaired by the District Collector, while the Lead District Manager (LDM) convenes its meetings.
In 2009, the Reserve Bank of India reviewed the Lead Bank Scheme through the Usha Thorat Committee. The committee emphasised making financial inclusion, rural credit flow, and coordination between banks and State Governments more effective.