Lead Bank

 

                          

 

Banks have a special importance in the economy. Banks work by pooling people's savings and making them available for productive work. Of course, the bank is also established for the purpose of profit. Therefore, it is not possible for their business to be only for social welfare. Banks implement their business strategy to maximize profits while maintaining the safety of people's deposits. Hence considering the higher risk of lending to agriculture, rural industries, cottage industries, small scale industries, banks pay less attention to them. Because the government and the central bank have to pay special attention to this sector. Some special policies are designed so that the banks should easily provide credit to this sector at the appropriate rate of interest. 'Lead Bank Scheme' is a part of such special policy.

Background :-

In 1965-67, the Slack season policy of Reserve Bank introduced liberal credit policy for selected sectors to overcome the decline in agricultural production and sluggish industrial production during the period 1965-67. Efforts were made to provide increased credit to agriculture, small scale industries and exports. In 1967-68, in order to contribute to the economic planning of the country, the idea that there should be 'public control' over the banks started to gain emphasis and hence the banks were nationalized in 1969. In June 1967, the status of banking services in India was - one bank branch for every 73,000 population. Out of the total 5,64,000 villages in India, only 1% of the villages had bank facilities. There was no network of banks in rural areas. Also the banks did not have the approach of rural development. Of the total disbursement of banks, 39% of loans were to the agriculture sector but only around 1% of them was provided by commercial banks, the remaining share was given by co-operative banks. This means that commercial banks pay very little attention to the credit needs of rural areas and especially industrially underdeveloped areas.

 

In this background Prof. D. R. Oct under the chairmanship of Gadgil. A study group was appointed in 1968. The group submitted its report in Oct 69 and recommended that 'Area Approach' should be adopted in planning and programs for adequate development of banking and credit infrastructure in rural areas. After nationalization of the bank in 1969, the 'Nariman Committee' appointed for the program of expansion of branches of public sector banks endorsed the same recommendation. In order for public sector banks to fulfill their social responsibility, it was recommended that each bank should focus on one district, where that bank should be called a 'Leader Bank'. Following the recommendations of these two committees, the Reserve Bank launched the 'Agrani Bank Scheme' in December 1969.

 

In this scheme, a specific bank was identified for the local development of each district.

1)   The responsibility of the lead bank was determined to determine the growth centers in the district,

2)   to find out the capacity of deposits.

3)     to check the gap in credit supply and to develop a mutual approach towards credit supply in collaboration with other banks and credit institutions in each district. In short, this bank was expected to be the leader in meeting the local credit needs by developing banking in our district. It was planned that the lead bank should take the initiative to develop banking in the district with the cooperation of all other banks.

 

Leading Banking Activities:

 

Specific tasks of the leading banks in the district are as follows-

1)     To survey the potential and resources of banking development.

2)      Those without bank accounts and mainly dependent on private lenders Surveying industrial, commercial and other establishments as well as farmers and increasing their own cash value by financing them through banks.

3)     To study facilities for storage and distribution of industrial and agricultural products and to combine marketing and credit.

4)      To stock agricultural inputs like fertilizers, seeds, pesticides Conducting survey of facilities and repair facilities of agricultural implements.

5)      Recruiting and training small borrowers and farmers in the frontline sectors to provide advice, including credit insurance and control over the end use of loan proceeds.

6)     Assisting other primary lending agencies.

               7)   Liaison and interaction with government and semi-government agencies.

The task of preparing the credit plan and action plan for each district was entrusted to the officer of the leading bank. Along with public sector banks, private sector banks (eg Jammu & Kashmir Bank Ltd.) were allotted districts as lead banks. 26 in 622 districts of India.

Banks are acting as lead banks. The leading banks in 33 districts of Maharashtra are as follows - Central Bank 1 7 districts, Bank of Maharashtra 6, State Bank of India 1, and Bank of India -12 districts.

To give an overview of the 'Agrani Bank Yojana' launched in 1969, Shri. UK A working group headed by Sharma was appointed by Reserve Bank. As per the recommendations of this task force some changes were made in the resources and procedures of the lead bank. After the adoption of the New Economic Policy in 1991, the winds of liberalization and globalization began to blow rapidly. Shares of nationalized banks were also sold in the market, private and foreign banks were encouraged. In June 2004 Mr. V.S. 'Advisory Committee on flow of credit to agriculture and allied activities' was appointed under the chairmanship of Vyas. Some changes were made in the 'Agrani Bank' scheme while implementing their recommendations. A High Level Committee was appointed in 2007-08 under the leadership of Reserve Bank Deputy Governor Smt. Usha Thorat. The committee made some important recommendations regarding the Pioneer Bank Scheme. He hoped to widen the scope of this scheme. Financial inclusion, role of state government towards leading banks, financial literacy, credit counseling, credit-plus activities, removing obstacles in providing credit to qualified potential borrowers, grievance redressal mechanism in loan repayment process were included.

 

The contribution of agriculture, rural, cottage and small industries as well as exports in the economic development of the country is debatable. The role of banks in this is 'prime'. The High Level Committee of Smt. Usha Thorat has expressed the opinion that the 'Agrani Bank' scheme, which was started in 1969 and has been successful so far, is necessary even today after changing it with the times in order to ensure proper cooperation between sub banks. Of course, it is natural that some 'old fashioned' defects come into this scheme. But considering the utility of the scheme, the challenge is now to remove the defects and make it more dynamic and effective.