ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Service Area Concept

Service Area Concept Bandi Ram Prasad ARUN GHOSH (July 23, 1988) fears that the recently introduced service area concept may not effectively serve the purpose for which it is designed. His main apprehensions appear to be as follows: a) Bank managers may tend to direct all their lending to large farmers, b) If a client falls foul of bank management in a service area, he/she can write off the possibility of getting a bank loan, c) It may subserve the interest, wishes and priorities of the central government. He assumes that (a) and (b) will be a fall oul of the emergence of a monopoly situation for bank branches in their designated areas coupled with non-inclusion of peoples' representatives or panchayats in the planning and lending process. Also, (c) will result in perpetration of the credit policies of the government in the rural areas since the banks are controlled by it. Are these fears valid and well founded? How can it be assumed that these problems will arise only due to the introduction of the service area concept? If that is the case, these problems should have been already in existence since the service area concept is nothing but an extension and refinement of the lead bank scheme which was in practice till recently and is: still being practised in spirit. The only structural change that has been introduced in the service area concept is decentralisation of the planning process and assigning a designated command area to each bank branch to cater to the entire credit needs of that area. The entire credit planning which was hitherto done at the district level by the land bank officer, with the help of various sub-committees comprised of government and bank representatives, is now shifted to the branch level and the manager of the branch decides what his/her designated area requires, how much credit he/she should dispense and in what way. In other words, instead of the land bank officer advising the branch manager on say, how many bullocks or camel carts are required to be financed in a given area, now the branch manager will himself/herself decide how many can be financed keeping in view various parameters like the market conditions, credit absorption capacity, viability of the additional units, etc He/she can also think of location specific diversification schemes which a lead bank officer sitting at the district headquarters may not visualise effectively. This way the branches would be more careful and responsible in catering to the needs of their designated areas. From a mere credit dispensing authority, the branch manger is made into a planner as well as a development banker.

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