Q. Consider the following statements regarding “Service Area Approach (SAA)”:
1. It was introduced in seventh five year plan for planned and orderly development of rural and semi-urban areas.
2. It is applicable to Scheduled Commercial Banks including regional rural banks.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

The Service Area Approach (SAA) introduced in April 1989 (7th five year plan) for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks.  

  • Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area.  
  • The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.  
  • The SAA scheme was reviewed from time to time and appropriate changes were made in the scheme to make it more effective. 

Source: TMH Ramesh Singh