Banks are required to have a credit-deposit (CD) ratio of 60% for their rural and semi-urban branches in the country, the Reserve Bank of India has stated in its revised guidelines on the lead bank scheme (LBS). 

Aiming to streamline operations and enhance effectiveness of the programme at the district level, the RBI has said that the CD ratio is an important parameter of credit disbursed in relation to deposits mobilised in the area and should be monitored at different levels.

The CD ratio need not be achieved separately for each branch, district or region but banks have to ensure that wide inter-state or inter-regional disparities in the ratio are avoided to minimise imbalance in credit deployment.

The RBI pointed out that low credit offtake in some districts was due to factors such as inadequate infrastructure and limited regional credit absorption ability. 

“Banks may review the performance of their branches in such areas and take necessary steps to augment credit flow. The factors affecting credit flow in the district may be discussed thoroughly in the district consultative committee (DCC) forum,” the draft guideline said.

Under the revised framework, districts having a CD ratio between 40 and 60% will be monitored by the DCC for improving the performance.

Districts with a CD ratio below 40% and/or whose credit disbursement falls below the figure for the previous year will monitored by a special sub-committee of the DCC, with lead district manager (LDM) as the convenor.

The sub-committee will make plans to improve the CD ratio.

Districts with CD ratio below 20% will be placed in a special category. For these districts, in addition to constitution of a special sub-committee and an action plan, the state government will be required to create necessary infrastructure and conditions conducive to lending, while banks will be responsible for boosting credit disbursement.

Progress in these districts will be monitored by the DCC and reported to banks’ corporate offices for focused attention to improve the CD ratio. 

According to the draft, state-level convener banks are required to identify and maintain an updated list of all unbanked rural centres (URCs) in the state. This has to be displayed on the website of each state-level bankers’ committee (SLBC) to help banks in selecting locations for opening outlets. 

In order to comply with the criteria of opening at least 25% of banking outlets in Tier-V and Tier-VI URCs, banks should give priority to unbanked villages with population above 5,000 ( Tier-V centres) and ensure their coverage with CBS-enabled banking outlets on priority basis.

For Tier-VI centres, convener banks will monitor coverage, and advise lead banks to review progress in DCC meetings.

The LBS, introduced in 1969, aims at coordinating the activities of banks, government and other developmental agencies to facilitate priority-sector credit flow for inclusive growth.

The revised guidelines seek to finetune the objectives of the scheme and strengthen the functioning of SLBCs and LDMs.

The RBI has invited public comments on the draft guidelines by 6 March.

Under the LBS framework, the RBI designates a commercial bank as lead bank in each district to coordinate credit institutions, government and stakeholders. Each bank appoints a lead district manager to oversee district-level implementation.