RBI overhauls Lead Bank Scheme; stops ‘No Due’ certificates, pushes rural outlets, sets 60% CD ratio rule

The Reserve Bank of India (RBI) Friday sought to further democratize credit access through the Lead Bank Scheme, publishing draft norms that require banks to waive ‘no dues’ certificates from potential borrowers, mandate opening at least a quarter of all new banking outlets in tier 5 and tier 6 centres, and direct lenders to maintain a 60% credit deposit ratio across their rural and semi-urban operations.

The RBI said the proposed revised scheme aims to improve credit absorption, strengthen local level planning, and remove bottlenecks that restrict the flow of funds to priority sectors.

The banking regulator urged lenders to expand physical access in unbanked rural locations, especially villages with more than 5,000 people. State Level Bankers’ Committees (SLBC) are required to maintain and publish updated lists of unbanked centres, while district level forums will monitor coverage and progress.

To reduce procedural hurdles for rural borrowers, banks have been told to rely on alternatives such as credit bureau checks, self declarations, CERSAI searches and peer monitoring instead of insisting on ‘no dues’ certificates, which more often than not slowed credit flows.

Districts with low CD ratios—below 40% and, particularly, those under 20%—will face intensified monitoring, with special sub committees required to prepare action plans to lift credit deployment, the RBI said.

Under the proposed norms, bottom-up credit planning through Block Credit Plans, District Credit Plans and Annual Credit Plans has been made mandatory, with tighter timelines and enhanced monitoring at district and state levels.

Banks have also been instructed to strengthen the role of Lead District Managers (LDMs), ensuring each district has a dedicated officer supported by adequate staff, IT systems and infrastructure to improve financial inclusion and credit coordination.