Service area approach (SAA) is a developed version of the ‘area approach’ structure of the Lead Bank Scheme. Under SAA plan each commercial bank / RRB branch in a rural and semi-urban area is designated to serve 15 to 25 villages for the planned and orderly development of the areas. The designated branch of a bank has to meet the banking needs of its service area vis-à-vis forge effective linkages between bank credit, production, productivity, and an increase in income levels of the villages.
The Service Area Approach scheme was introduced in 1989 and it was reviewed in December 2004 in view of many criticisms that the scheme consumes many restrictive provisions. Pursuant to the review, RBI decided to dispense with certain restrictive provisions of the scheme. As per the revised SAA guidelines, borrowers have the choice of approaching any branch of the banks for their credit requirements. The commercial banks / RRBs, as per revised guidelines, are also free to lend to borrowers of any rural and semi-urban area except under Government sponsored schemes where Scheme itself provides for the obtention of ‘No Dues Certificate’. Banks are directed to dispense with the procedure of obtaining ‘No Due Certificate’ from other banks/financing institutions, for all types of loans including loans under Government Sponsored Schemes, except where Scheme itself provides for the obtention of ‘No Dues Certificate’.
In lieu of depending upon ‘No-due certificate’ issued by other banks/financial institutions as part of the credit appraisal exercise, banks are encouraged to check the credit information of prospective borrower through other channels like Self-declaration or an affidavit from the borrower, Credit history check through credit information companies (CIBIL, etc.), CERSAI registration, Information sharing among lenders, Information search by writing to other lenders with an auto deadline, peer monitoring, etc.
Banks are also advised to submit information/data to all Credit Information Companies (CICs), as required in terms of extant instructions issued by RBI. India currently has four Credit Information Companies- CIBIL (TransUnion CIBIL Ltd), Equifax, Experian, and Crif High Mark who have been granted Certificate of Registration by RBI.