Banks need to achieve 60% CD ratio in rural, semi-urban branches: RBI draft

Prioritise opening CBS-enabled branches in tier-5 centres

Banks have been mandated to have a credit-deposit (CD) ratio of 60 per cent for their rural and semi-urban branches in the country, according to the regulator’s draft revised guidelines on the lead bank scheme (LBS). 

 

The norms, laid down by the Reserve Bank of India (RBI), have asked bank to prioritise opening in Tier-V centres outlets powered by core banking solutions (CBS).

 

While the CD ratio need not be met for each branch, district, or region, banks are required to ensure that wide inter-state or inter-regional disparities in the ratio are avoided.

 

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

 

 

Banks have been advised to review branch-level performance in such districts and take steps to augment credit flow.

 

Under the revised framework, districts with a CD ratio between 40 and 60 per cent will be monitored by the District Consultative Committee (DCC).

 

Districts with a CD ratio below 40 per cent and/or whose credit disbursement falls below the figure for the previous year will monitored by a special sub-committee of the DCC.

 

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

 

Districts with a ratio below 20 per cent will be classified as a “special category”. In such cases, in addition to a special sub-committee and an action plan, state governments will be required to make efforts to create infrastructure and conditions for lending, while banks will be responsible for enhancing credit disbursement.

 

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

 

The draft says state-level convener banks have to identify and maintain an updated list of all unbanked rural centres (URCs) in the state and display it on the state-level bankers’ committee (SLBC) websites to help banks in selecting locations for opening outlets. To meet the requirement of opening at least 25 per cent of banking outlets in Tier-V and Tier-VI URCs, banks need to prioritise unbanked villages with populations above 5,000 (Tier-V centres) and ensure their coverage with CBS-enabled banking outlets on priority.

 

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

 

The LBS, introduced in 1969, provides a mechanism for coordination among banks, government agencies, and other stakeholders to facilitate priority-sector credit flow, promote financial inclusion, and support rural development.

 

The revised guidelines seek to finetune the objectives of the scheme, strengthen institutional mechanisms, clarify roles and responsibilities, and reinforce the functioning of SLBCs. 

 

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

 

Under the LBS framework, the RBI designates a commercial bank as lead bank in each district to coordinate credit institutions and stakeholders. Each bank appoints a lead district manager to oversee district-level implementation. The National Bank for Agriculture and Rural Development appoints a district development manager to promote rural credit, financial inclusion, and agricultural and rural development, while the RBI designates a lead district officer (LDO) to represent it at district level.

 

At state/Union territory level, the RBI designates a bank with a significant presence as convener bank.