Service area approach (SAA) is an improved version of area approach of Lead Bank Scheme. Under SAA plan each commercial bank / RRB branch in rural and semi-urban area is designated to serve 15 to 25 villages for planned and orderly development of rural and semi-urban 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 increase in income levels of the villages.
The Service Area Approach scheme which was introduced in 1989 was reviewed in December 2004 as there are many criticisms that scheme consumes many restrictive provisions. In the review it was decided to dispense with the restrictive provisions of the scheme such as villagers need to contact specified bank branch for their credit needs. The following decision was taken by RBI and accordingly banks were directed to follow the revised SAA. As per revised SAA guidelines, borrowers have the choice of approaching any branch for their credit requirements. The commercial banks / RRBs are also free to lend to any borrower of any rural and semi-urban area except under Government sponsored schemes where Scheme itself provides for obtention of ‘No Dues Certificate’. Banks were further 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 obtention of ‘No Dues Certificate’. Instead of no due certificate, banks can check the credit information of prospective borrower through other channels like Credit information companies (CIBIL etc.), CERSAI, Information sharing among lenders, writing to other lenders with an auto deadline.