UPSC Prelims 2012 Q80: Indian Economy – Banking & Financial Sector
The basic aim of Lead Bank Scheme is that
- (a) big banks should try to open offices in each district
- (b) there should be stiff competition among the various nationalized banks
- (c) individual banks should adopt particular districts for intensive development
- (d) all the banks should make intensive efforts to mobilize deposits
Answer: (c) individual banks should adopt particular districts for intensive development
Explanation
Lead Bank Scheme
The Lead Bank Scheme began in 1969.
Each district was allotted to one bank, the lead bank, which coordinates all banks and agencies there for the district's development.
| Option | Verdict | Reason |
|---|---|---|
| (a) big banks should try to open offices in each district | Incorrect | Opening branches everywhere is not the aim |
| (b) there should be stiff competition among the various nationalized banks | Incorrect | The scheme is about coordination, not competition |
| (c) individual banks should adopt particular districts for intensive development | Correct | The 'area approach' |
| (d) all the banks should make intensive efforts to mobilize deposits | Incorrect | It is about credit planning, not deposits |
Background:
| Point | Detail |
|---|---|
| Idea from | Gadgil Study Group (area approach) |
| Recommended by | Nariman Committee |
| Lead bank's job | Prepare the District Credit Plan; convene the district committee of banks |
| Reviewed by | Usha Thorat Committee (2009) |
Answer: (c) individual banks should adopt particular districts for intensive development.
Why each option is right or wrong
- (a) Incorrect. The aim is not that big banks open offices in each district.
- (b) Incorrect. The scheme seeks cooperation, not stiff competition among banks.
- (c) CORRECT. Each bank adopts particular districts for intensive development.
- (d) Incorrect. Its aim is planned credit, not efforts to mobilize deposits.
Key point
Lead Bank Scheme (1969): one lead bank per district, area approach (Gadgil Study Group), Nariman Committee, District Credit Plan; reviewed by the Usha Thorat Committee.
Remember
Lead Bank Scheme = one bank leads one district.
Common mistakes
- Confusing the lead bank with a bank that has the most branches.
- Mixing up the scheme with bank nationalisation, which happened the same year.
- Thinking it is about deposits when it is about credit for development.
Exam tip
'Lead' means leading the others in one district. Look for the option about adopting districts.
Sources
- Reserve Bank of India — Master Circular on Lead Bank Scheme
- Reserve Bank of India — Report of the High Level Committee to Review the Lead Bank Scheme (Usha Thorat, 2009)