RBI/2009-10/331
RPCD.CO.LBS.HLC.BC.No. 57  /02.19.10/2009-10

March 2, 2010

The Chairmen/ CMDs
All Lead Banks/All Scheduled Commercial Banks

Dear Sir,

Report of the High Level Committee to Review Lead Bank Scheme-
Implementation of the recommendations

Over a period of four decades, since the inception of the Lead Bank Scheme (LBS), several changes have taken place necessitating a relook at the scheme to make it more effective in the changed economic scenario with sharper focus on financial inclusion and recent developments in the banking sector. A High level Committee to review the Lead Bank Scheme was, therefore, constituted by Reserve Bank of India.

2. The Committee recommended that the Lead Bank Scheme is useful and needs to continue. The overarching objective of the Scheme is to enable banks and State Governments to work together for inclusive growth.

3. All the action points emanating from the recommendations of the Committee requiring action to be taken by the Lead Banks/commercial banks are appended at Annex. You are advised to initiate actions for speedy implementation of the recommendations and also closely monitor the progress made by commercial banks in this regard.

4. With a view to improving the efficacy of the LBS, we advise that the various fora under the LBS need to be strengthened.  More time of the SLBC/DCC machinery may be utilized to discuss specific issues inhibiting and enabling financial inclusion.  At the District Consultative Committee (DCC) level, sub committees as appropriate may be set up to work intensively on specific issues and submit reports to the DCC for its consideration. Illustrative guidelines on the conduct of District Consultative Committee (DCC) meetings are detailed below:

I. Conduct of DCC Meetings

i) District Consultative Committee (DCC) meeting may be convened by the Lead Banks at quarterly intervals as per the extant instructions.

ii)  At the District Consultative Committee (DCC) level, sub-committees as appropriate may be set up to work intensively on specific issues and submit reports to the DCC for its consideration.

iii) DCC should give adequate feedback to the SLBC on various issues that needs to be discussed on a wider platform, so that,  these receive adequate attention at the State Level.

II. Agenda items

While all Lead Banks are expected to address the problems particular to the concerned districts, some of the important areas which are common to all the districts on which the Lead Banks should invariably discuss in the fora  are as under:

1. monitoring mechanism to periodically assess and evaluate the progress made in achieving the road map to provide banking services within the time frame prescribed.

2. identification of unbanked/under banked areas for providing banking services in a time bound manner with a view to achieve 100% financial inclusion

3. the specific issues inhibiting and enabling IT enabled financial inclusion

4. issues to facilitate 'enablers' and remove/minimise  'impeders' for banking development for inclusive growth

5. monitoring initiatives for providing 'Credit Plus' activities by banks and State Governments such as setting up of Credit Counselling Centres and RSETI type Training Institutes for providing skills and capacity building to manage businesses.

6. review of performance of banks under Annual Credit Plan (ACP)

7. flow of credit to priority sector and weaker sections of the society

8. assistance under Government sponsored schemes

9. grant of educational loans

10. progress under SHG - bank linkage

11. SME financing & bottlenecks thereof, if any

12. timely submission of data by banks

13. review of relief measures (in case of natural calamities  wherever applicable)

The above list is illustrative and not exhaustive. The Lead Banks may include any other agenda item considered necessary.

III.  Role of LDMs

As the effectiveness of the Lead Bank Scheme depends on the dynamism of the District Collector and the LDM, with supportive role of the Regional/Zonal Office, the office of Lead District Managers (LDMs) should be sufficiently strengthened with appropriate infrastructural support being the focal point for successful implementation of the Lead Bank Scheme.  Officers of appropriate level and attitude should be posted as LDMs. Apart from the usual role of LDMs like convening meetings of the DCC and DLRC, periodical meetings of DDM/LDO/ Government officials for resolving outstanding issues etc., the new functions envisaged for LDMs include the following:

1. drawing up the road map for banking penetration

2. monitoring implementation of annual credit plan

3. associate with the setting up of Financial Literacy and Credit Counselling Centres (FLCCs), RSETIs by banks

4. holding annual sensitisation workshops for banks and government officials with participation by NGOs/Panchayati Raj Institutions (PRIs)

5. arranging for quarterly awareness and feedback public meetings, grievance redressal etc.

5. Further, we draw your attention the following major recommendations:

I.  BANKING PENETRATION

Lead Banks are advised to focus attention on the urgent need for achieving 100% financial inclusion through penetration of banking services in the rural areas. Such banking services may not necessarily be extended through a brick and mortar branch but can be provided through any of the various forms of ICT- based models, including through BCs. However, ICT connectivity should not be an issue of consideration for not pursuing financial inclusion by commercial banks/RRBs.  In this connection you may be guided by our Circular RPCD.CO.LBS.HLC.BC.No.43/ 02.19.10/2009-10 dated November 27, 2009.

II.  GREATER ROLE FOR PRIVATE SECTOR BANKS

The private sector banks should involve themselves more actively by bringing in their expertise in strategic planning and leveraging on Information Technology.  The Lead Banks, on their part, should also ensure that private sector banks are more closely involved in the LBS, both while drawing up and in implementing the ACP.

III.  PREPARATION OF DISTRICT CREDIT PLAN/ANNUAL CREDIT PLAN

i)   Preparation of Potential Linked Plan (PLP) by NABARD may be advanced to be completed by August every year so that the State Governments may factor in the projection made by the PLP in the state/district plan.  While preparing the PLP, the District Development Managers (DDMs) of NABARD along with the Lead District Managers (LDMs) of the Lead Banks may discuss with the concerned development departments of the State Governments and the banks having significant presence in the districts.  The District Credit Plan/Annual Credit Plan may be prepared by the LDMs taking into account the PLP for agriculture and allied activities.  For other sectors (i.e. other than agriculture and allied activities), the LDM should work out a similar action plan based on the commitments made by the State Government, other stakeholders and banks. 

ii) The Zonal/controlling offices of banks, while finalizing their business plans for the year, should take into account the commitments made in the ACP which should be ready well in time before the performance budgets are finalized.  It may be ensured that there is little or no divergence between the PLP and the DCP/ACP.

IV.  QUARTERLY PUBLIC MEETING AND GRIEVANCE REDRESSAL

The Lead District Manager may convene a quarterly public meeting at various locations in the district, in coordination with the Reserve Bank, banks having presence in the area and other stakeholders to generate awareness of the various banking policies and regulations relating to the common person, obtain feedback from the public and provide grievance redressal to the extent possible at such meetings or facilitate approaching the appropriate machinery for such redressal.

V.  FINANCIAL LITERACY & CREDIT COUNSELLING

i) Each Lead Bank is expected to open a Financial Literacy and Credit Counselling Centre (FLCC) in every district where it has lead responsibility by following the recent guidelines issued by RBI in this regard. Suitable grant may be considered out of the Financial Inclusion Fund (FIF) to set up such centres in districts identified as being financially excluded by the Committee on Financial Inclusion.

ii)  The State Government machinery may support the efforts made by banks for financial literacy. Towards this, State Governments may proactively provide assistance of the government machinery, especially at the grass root level such as schools, panchayats, etc., for this purpose.

6.  All other instructions issued prior to this circular will continue to remain operative /effective.

7.   We shall be glad if you will please keep our respective Regional Offices informed of the action taken by you on the various recommendations at quarterly intervals.

8.  Please acknowledge receipt.

Yours faithfully

(Deepali Pant Joshi)
Chief General Manager

Encl: As above

Annex

High Level Committee to review Lead Bank Scheme -  Action Points for Lead Banks/Commercial Banks