RBI extends lead bank scheme to urban areas in inclusion drive

MUMBAI: Stating that there are millions of unbanked people even in urban areas, the Reserve Bank in a significant move has asked banks to bring all districts in metropolitan areas under the lead bank scheme ( LBS) fold.

The lead bank scheme, launched way back in 1969, is an integrated mechanism to extend banking services to the doorsteps of consumers, especially the poor.

The move is part of increasing the scope of its financial inclusion drive to urban areas on one hand and helping the government realise its efforts to plug the loopholes in subsidy deliveries by transferring all the benefits directly to the bank accounts of the target people.

Announcing the annual monetary policy, wherein it reduced the rate at which it lends to banks (repo rate) by a token 25 basis points to 7.25 per cent, RBI Governor D Subbarao said, the purpose of the LBS extension is to bring all the unbanked urban areas under the banking fold.

"With the objective of providing an institutional mechanism for coordination between government authorities and banks, facilitating doorstep banking to the excluded segment of urban poor, and to implement direct benefit transfer scheme of the government, it has been decided to bring all the districts in metropolitan areas under the LBS fold," he said.

It can be noted that at present, the LBS is applicable only to non-urban districts as of now.

Explaining the rationale for the move, the RBI said: "The challenge of financial exclusion is widespread in metropolitan areas as well, especially amongst the disadvantaged and low-income groups and not just in villages."