Lead Bank Scheme Overhaul: High-Level Panel Recommendations

RBI/2009-10/329 RPCD.CO.LBS.HLC.BC.No.56  /02.19.10/2009-10 February 26, 2010 CMDs of all SLBC Convenor 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 Lead Bank Scheme was, therefore, constituted by Reserve Bank of India. 2.   The Committee recommended that the LBS 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 SLBC convenor banks at the state level and lead banks/commercial banks at the district level are appended at Annex I & II respectively. You are advised to initiate actions for speedy implementation of the recommendations and also closely monitor the progress made by the lead banks / commercial banks in this regard. 4.   The SLBC plays a very important role in development at state level, There is, therefore, a need for streamlining and strengthening of the same. With a view to improving the efficacy of the Lead Bank Scheme, we advise that the various fora under the Lead Bank Scheme need to be strengthened.  We draw your attention specifically to the recommendations of the Committee relating to strengthening of implementation of the Lead Bank Scheme at state and district level. Illustrative guidelines on the conduct of State Level Bankers Committee (SLBC) meetings are detailed below: I.  Conduct of SLBC Meetings i)     The SLBC meetings may be held regularly at quarterly intervals and they should be chaired by the Chairman & Managing Director (CMD) of the convenor bank. Additionally, the SLBC meetings may be co-chaired by Additional Chief Secretary or Development Commissioner of the State concerned. ii)  In view of the large membership of the SLBC, it would be desirable for the SLBC to constitute Sub-Committees for specific tasks. The sub committees may examine the specific issues in-depth and devise solutions/recommendations for consideration of the SLBC. The composition of the sub-committee and subjects/ specific issues impeding/enabling financial inclusion to be deliberated upon, may vary from State to State depending on the specific problems/issues faced by the States. iii)   The secretariat/offices of SLBC should be sufficiently strengthened to enable the SLBC convenor bank to effectively discharge its functions. Each SLBC may have its own website.  In each State, a full day sensitisation workshop may be convened by the SLBC convenor bank in April/May every year. iv) The various fora at lower levels may give adequate feedback to the SLBC on issues that need to be discussed on a wider platform. v)  Several institutions and academicians are engaged in research and studies etc. that have implications for sustainable development in agriculture and MSME sector. Engaging with such research institutions and academicians would be useful in bringing in new ideas for furthering the objectives of the Lead Bank Scheme. The SLBC/DCC may, therefore, identify such academicians  and researchers and invite them as 'special invitees'  to attend SLBC/DCC meetings occasionally both for adding value to the discussion and also associate them with studies for product formulation appropriate to the State/District. Other 'special invitees' may be invited to attend SLBC meetings depending on the agenda items/issues to be discussed in the meetings. vi) The activities of NGOs in facilitating and channeling credit to the low income households are expected to increase in the coming years. Several Corporate houses are also engaged in Corporate Social Responsibility activities for sustainable development. Bank's linkage with such NGOs/Corporate houses operating in the area to ensure that the NGOs/Corporates provide the necessary 'credit plus' services can help leverage bank credit for inclusive growth. Success stories could be presented in SLBC/DCC meetings to serve as models that could be replicated. Agenda Items While all SLBCs/Lead Banks are expected to address the problems particular to the concerned states, some of the important areas which are common to all States on which the SLBCs/Lead Banks should invariably discuss in the fora  are as under: i. monitoring mechanism to periodically assess and evaluate the progress made in achieving the road map to provide banking services within the time frame prescribed ii. identification of unbanked/under banked areas for providing banking services in a time bound manner with a view to achieve 100% financial inclusion iii. the specific issues inhibiting and enabling IT enabled financial inclusion iv. issues to facilitate 'enablers' and remove/minimise  'impeders' for banking development for inclusive growth v. 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 vi. review of performance of banks under Annual Credit Plan (ACP) vii. regional imbalances in deployment of credit to various sectors of the economy viii. Credit - Deposit Ratio of the State ix. flow of credit to priority sector and weaker sections of the society x. assistance under Government sponsored schemes xi. grant of educational loans xii. progress under SHG - bank linkage xiii. SME financing & bottlenecks thereof, if any xiv. steps taken for improving land record and recovery mechanism xv timely submission of data by banks xvi. review of relief measures (in case of natural calamities  wherever applicable) and  xvi. issues remaining unresolved at the DCC/DLRC meetings The above list is illustrative and not exhaustive. The SLBC convenor banks may include any other agenda item considered necessary. The Chief Minister/Finance Minister and senior level officers of the State/RBI (of the rank of Deputy Governor / Executive Director) may be invited to attend the SLBC meetings. 5.     Further, we draw your attention the following major recommendations: I.   BANKING PENETRATION i)   SLBC convenor banks / 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 constraint 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)   SLBC convenor banks may take up impeders with the State governments as issues of road/digital connectivity, conducive law and order situation, uninterrupted power supply and adequate security etc. for ensuring banking expansion at all centres where penetration by the formal banking system is required. However, these should not inhibit the introduction of financial inclusion initiatives.   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 Lead Bank Scheme, both while drawing up and in implementing the ACP/DCP. III.  PREPARATION OF DISTRICT CREDIT PLAN/ANNUAL CREDIT PLAN i)   NABARD prepares PLPs for all the districts of the country. These plans must  be prepared by October-November every year and so as to serve as inputs to the district planning authorities for preparing their budgetary plans and to the lead banks for preparing the District Credit Plans (DCP). Preparation of PLP is to be advanced to be completed by August every year to enable the State Governments to factor in the PLP projections. While preparing the PLP for districts, NABARD should take into account the firm commitments given by the State Government/ banks/other stakeholders for the year. 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 banks having a presence in the area and other stakeholders to generate awareness of the various banking facilities, policies and regulations which impact the common person, obtain feedback from the public and provide grievance redress to the extent possible at such meetings or facilitation for approaching the appropriate machinery for grievance redress. V. CAPACITY BUILDING/TRAINING/SENSITIZATION PROGRAMMES i)  There is a need for sensitising the District Collectors and CEOs of Zilla Parishads  on banks and banking in general as also on the specific scope and role of the Lead Bank Scheme. Such sensitisation should form part of the probationary training of such officers. Further, as soon as they are posted in a district, the SLBC may arrange for exposure visits for the District Collectors to the SLBC convenor’s office for sensitisation and understanding of the Lead Bank Scheme. ii)  Staff at the operational level of banks and government agencies associated with implementation of the Lead Bank Scheme need to be aware of the latest developments and emerging opportunities. There is need for staff sensitisation/ training/seminars, etc. at periodic intervals on an ongoing basis. VI. LIAISON WITH STATE GOVERNMENT As the effectiveness of the Lead Banks Scheme depends on the dynamism of the District Collector and the LDM, with supportive role of the Regional/Zonal Office, you are advised to follow up with the respective State Governments for extending necessary support as it may be impossible for the banks to achieve the objective of financial inclusion in its most comprehensive sense. 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 - I High Level Committee to Review Lead Bank Scheme - Action Points for SLBC Convenor Banks Sr. No.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/329 · issued 26 Feb 2010. The plain-English explanation above is BankPulse’s own independent summary.

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