Letter to BS: RBI criticises public sector banks on Lead Bank scheme

Historically, nationalisation of banks in India and the introduction of LBS were initiatives aimed at financial inclusion, ensuring wholehearted participation of all stakeholders

This refers to the report “RBI criticises PSBs on Lead Bank Scheme” by Namrata Acharya (June 4). Though the major portion of the responsibility in implementing the Lead Bank Scheme falls on the shoulders of public sector banks (PSBs) as these banks have over 70 per cent market share in banking business, interpreting RBI’s circular dated April 6, 2018, on revamp of Lead Bank Scheme (LBS), as a criticism of PSBs alone, exposes the media bias against the public sector.

Historically, the nationalisation of banks in India and the introduction of LBS were initiatives aimed at financial inclusion, ensuring wholehearted participation of all stakeholders. At no stage, LBS was conceived as an exclusive responsibility of the PSBs, as the implementation of the scheme needed policy support from the Central government, the RBI and state governments, and the involvement of all banks and several government and non-government organisations.

Just as the banking system is struggling with the incompatibility of the size and dimensions of currency notes issued by the RBI, the absence of a uniform procedure in the collection and compilation of ground level data on credit needs and credit off-take has been a major impediment in fixing targets and their monitoring under the LBS. Post-computerisation, diverse software used by different banks pose a real problem in the collection and use of data. Unless these issues are addressed, periodic revamps and reviews will remain raw material for preparing background notes for future ‘Review Committees’, with not much improvement at the ground level.

M G Warrier Thiruvananthapuram

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