Class 11 Finance Important Chapter 9 Lead Bank Scheme

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Class 11 Finance Important Chapter 9 Lead Bank Scheme

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Lead Bank Scheme

Chapter: 9

IMPORTANT QUESTION AND ANSWER

Answer the Following Question:

1. What is the Lead Bank Scheme?

Ans: The Lead Bank Scheme is a strategy introduced by RBI in 1969 assigning each district a lead bank responsible for banking development, credit extension, and coordination among banks and financial institutions in that district.

2. What are the main objectives of the Lead Bank Scheme?

Ans: To identify suitable areas for banking, maximize credit facilities, mobilize deposits, coordinate financial institutions, and address developmental hurdles in districts.

3. Mention three major functions of the lead bank in a district.

Ans: Surveying banking potential and unbanked centers, phased branch expansion, coordinating with government agencies, and evolving district credit plans.

4. List any two committees formed under the Lead Bank Scheme.

Ans: District Consultative Committee (DCC) and State Level Bankers Committee (SLBC).

5. What are the limitations of the Lead Bank Scheme?

Ans: Lack of uniform methodology in plan formulation, non-alignment with government programs, banks assigned districts without presence, and ineffectiveness in poorly developed districts.

6. Explain how the Lead Bank Scheme contributes to rural development and financial inclusion.

Ans: The Lead Bank Scheme plays a pivotal role in promoting rural development and financial inclusion in India. By assigning a lead bank to every district, the scheme ensures that the banking system reaches unbanked and remote areas. The lead bank surveys the economic potential of the district and opens branches in areas lacking access to banking services.

This outreach helps mobilize rural savings and directs credit to priority sectors like agriculture, small-scale industries, and self-employed individuals. By offering affordable loans and financial advice to weaker sections of society, the scheme improves livelihoods and encourages income-generating activities.

Additionally, by coordinating with local government bodies and financial institutions, the lead bank ensures effective implementation of welfare schemes, thereby reducing regional imbalances and promoting inclusive growth.

7. Describe the role of various committees under the Lead Bank Scheme in implementing district-level banking plans.

Ans: To effectively implement the Lead Bank Scheme, several multi-tier committees were established:

(i) District Consultative Committee (DCC): Comprises lead bank officials, representatives from other banks, and district administration. It helps identify local needs and coordinates development efforts.

(ii) District Level Review Committee (DLRC): Reviews the progress of credit deployment, branch expansion, and evaluates the performance of banks and institutions.

(iii) Block Level Bankers Committee (BLBC): Operates at the block level, ensuring coordination between banks and local development bodies for effective rural outreach.

(iv) State Level Bankers Committee (SLBC): Oversees state-wide banking development by formulating state-level strategies and policies.

(v) State Level Review Committee (SLRC) and Standing Committee (SC): These monitor the functioning of banks, provide feedback, and address systemic issues.

These committees facilitate collaboration, monitoring, and feedback mechanisms, which are crucial for aligning banking operations with local and regional development goals.

8. How has the Lead Bank Scheme evolved over time since its inception in 1969?

Ans: The Lead Bank Scheme has undergone several developments since its introduction in 1969:

(i) Early Challenges: In the beginning, there was confusion about the roles of lead banks, which slowed implementation. However, by 1973–74, surveys were completed in most districts.

(ii) High Power Committee (1976): RBI set up a committee to monitor the scheme’s progress and issue guidelines. As a result, three-year district credit plans were introduced.

(iii) Service Area Approach (1989): This approach assigned each rural bank branch a specific geographic area to serve, improving accountability and rural credit delivery.

(iv) Emphasis on Priority Sector Lending: Over the years, the scheme increasingly focused on lending to agriculture, MSMEs, and weaker sections of society.

(v) Digital Inclusion: In recent years, the scheme has encouraged digital banking initiatives like DBT (Direct Benefit Transfer) and PMJDY (Jan Dhan Yojana) through lead banks.