L.B.S. is one of the economic measures taken by the Government of India for financial inclusion. What is L.B.S. in this context ?

Question

UnlockIAS · Accepted Answer

Correct — A, Lead Banking Scheme. In a financial-inclusion context L.B.S. is the LEAD BANK SCHEME — and it is worth noting that the official name is 'Lead Bank Scheme', not 'Lead Banking Scheme' as the option prints it; the paper's wording is a slip, not a different programme. The idea behind the scheme is what economists call the area approach: instead of leaving every bank to compete everywhere and serve nowhere in particular, each district in the country is assigned to a designated 'lead bank', which takes responsibility for the credit development of that district as a whole. The lead bank surveys the district's resources and credit gaps, draws up the District Credit Plan, and convenes the institutional machinery — the District Consultative Committee and the District Level Review Committee — through which commercial banks, cooperative banks, regional rural banks, the district administration and government departments coordinate their lending. The scheme is conventionally dated to 1969, the year the Government nationalised fourteen major commercial banks, and standard accounts trace it to the 'area approach' recommended that year by a study group of the National Credit Council under Gadgil and by a bankers' committee under Nariman; the card flags that attribution as the conventional one rather than asserting it as independently confirmed, because the primary Reserve Bank page could not be verified for this entry. The Reserve Bank has reviewed the scheme periodically, most notably through a High Level Committee under Usha Thorat in 2009.

Why the other options are wrong — (b) There is no programme of this name in Indian banking. It is a plausible-sounding construction built by swapping 'Lead' for 'Loan', which is exactly what the question is testing — whether you know the actual expansion or are reconstructing it from banking-sounding words.  (c) Not a financial term at all. It reads like a mechanical or engineering phrase and has no place in a question about financial inclusion; it is in the set only to fill a fourth slot.  (d) Another invented expansion, and the closest to option (b) — 'Loan Banking' is not a recognised category of banking in India. The distinction the paper is drawing is between a real scheme with a district-level institutional machinery and three phrases that merely sound official.

Concept: Financial inclusion means getting banking services to people and places the commercial banking system would otherwise skip, and India has pursued it through a long series of structural interventions rather than through any single scheme. The Lead Bank Scheme is one of the earliest and most durable: it makes a named bank accountable for a named district, which converts a diffuse national objective into an assignable local responsibility. The same 1969-onwards logic produced priority sector lending targets, the Regional Rural Banks set up from 1975, and the branch-licensing rules that required banks to open rural branches. Later instruments — business correspondents, no-frills and later Jan Dhan accounts, payments banks and small finance banks — work on the access side rather than the institutional-responsibility side, but they are coordinated through the same district and State-level forums that the Lead Bank Scheme created.

State PCS 2022 Q90 — Economy PYQ with Answer

State PCS 2022 Q90 — Economy PYQ with Answer