Lead Bank Scheme:- Introduced by the Reserve Bank of India, the Lead Bank Scheme. Providing banking services and ensuring financial inclusion were the goals. Serving all societal segments was the plan’s goal. Establishing a lead bank in each Indian district was the goal of the Scheme. With other banks and financial institutions in the region, the lead bank would coordinate. The goal was to guarantee that banking facilities were used effectively and efficiently. Enhancing loan flow to priority industries was another goal of the program. The program was designed to encourage rural development.
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A bank that manages loan syndication arrangements is known as a lead bank. For this function, which includes finding the syndicate members and settling on the financing arrangements, the lead bank gets paid an extra fee. The lead bank represents an underwriting syndicate in the Eurobond market as an agency.
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The table below explains the goals of the Lead Bank Scheme:
Objectives of the Lead Bank Scheme | Importance/ Advantages | Means of Achievement |
Identify unbanked and underbanked regions in districts | Important to extend banking facilities to all regions | Economic survey and identification of regions |
Evaluate physiographic, agro-climatic, and socio-economic conditions through economic survey | Necessary to understand the conditions and needs of the region | Conducting an economic survey |
Remove regional imbalances through appropriate credit deployment | Essential to promote balanced development | Appropriate credit deployment |
Extend banking facilities to unbanked areas | Important to ensure financial inclusion | Establishment of banking facilities in unbanked areas |
Address credit gaps in various sectors through a credit plan | Necessary to address the needs of various sectors | Development and implementation of a credit plan |
Identify economically viable and technically feasible schemes | Essential to ensure effective use of credit | Identification and evaluation of schemes |
Implement structural and procedural changes in the banking sector | Necessary to improve banking operations | Introduction of structural and procedural changes |
Foster cooperation among financial and non-financial institutions | Essential for coordinated development | Promotion of cooperation between financial and non-financial institutions |
Promote overall development of the districts | Essential for overall growth and progress | Implementation of development programs |
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The following are drawbacks and issues with the Lead Bank Scheme:
A high-power committee was constituted by the Indian government. Usha Thorat, a former deputy governor of the RBI, headed the committee. The group was tasked with making recommendations for changes to the Lead Bank Scheme. The goal of the reforms was to solve issues facing the banking industry. Among these difficulties are growing levels of autonomy and privatization.
The Lead Bank Scheme made a significant contribution to the financial inclusion and rural growth of India. Nonetheless, the plan ran into a number of difficulties. One major obstacle was insufficient infrastructure. Another challenge was a lack of cooperation among interested parties.
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Q. When was India’s Lead Bank Scheme launched?
Ans- The Gadgil committee’s suggestion led to the launch of the lead bank project in India in 1969.
Q. What is the Lead Bank Scheme’s purpose?
Ans- It is the lead bank’s responsibility to direct and oversee credit institutions. Improving the flow of finance to priority industries is the goal. Rural and semi-urban areas are the main focus. The basic operational unit is the district.
Q. How do banks of lead become selected?
Ans- Generally, a district’s primary accountability falls to a bank. In rural locations, the bank ought to have a sizable branch network. The bank should also have sufficient resources in terms of money and personnel.
Q. In the Lead Bank Scheme, what is the RBI’s role?
Ans- The Reserve Bank of India (RBI) is responsible for overseeing and managing the Lead Bank Scheme. The lead banks receive instructions and guidance from the RBI. RBI ensures that the objectives of the program are fulfilled.
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