The Banking industry in India has made considerable progress especially during the last 3 decades, to emerge as one of the accredited agencies of rural development.The orientation towards rural economy gained momentum only after nationalization of major commercial Banks. For various reasons, they took roots mainly in the urban and metropolitan centers and bulk of loans and advances was directed to large and medium scale industries. No serious attempt was made by banks to finance agricultural sector. The Co-operative Banking structure was assigned the main task of meeting credit requirements in the rural areas.Yet,the credit gap remained unfilled even after supplementing the efforts of co-operatives.In fact, it started widening further especially after green revolution in mid 60’s in view of the larger and increasing credit needs of Indian Agriculture. The above process necessitated commercial banks to join the force. This envisaged increasing lending to sectors like Agriculture, SSI and Services with emphasis on borrowers of small means. The National Credit Council was set up in Dec.’67 to determine the priorities of bank credit among various sectors of the economy. The NCC appointed a study group on the organizational framework for the implementation of social objectives in Oct.’68 under the Chairmanship of Prof. D R Gadgil. The study group found that the Commercial Banks had penetrated only 5000 villages as of June’67 and out of the institutional credit to agriculture, at 39%, the share was negligible at 1%, the balance being met by the co-operatives. The Banking needs of the rural areas in general and backward in particular were not taken care of by the Commercial Banks. Besides, the credit needs of Agriculture, SSI and allied activites remained neglected.Therefore, the group recommended the adoption of an area approach for bridging the spatial and structural credit gaps.
GENESIS OF THE LEAD BANK SCHEME
The study group which was presided...
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