Along with the basic resources such as land and water human resources, material resources and financial resources form the basic input to any successful development programme. Among these the role of financial resources is the prime. The banks, which are major custodians of financial resources, their involvement in development activities through credit linkages is crucial for overall growth - and development. Now in Kerala all local bodies have their own development plans formulated through peoples' participation. Thus the development project becomes locally specific and exclusive to suit the local needs. The local banks and other financial institutions were identified as the major source of financial support. The credit needs of a local area is supported by the banks based on a credit plan prepared each and every year. Through the peoples plan campaign the local bodies in Kerala formulated thousands and thousands of locally specific development projects. Actually the schemes for credit plan were prepared by Service Area Banks and has been introduced to ensure credit availability to local development and also to formulate priority lending. Even though the people's plan campaign in Kerala has created a very conducive environment for banks to operate with the local area, none of the banks made any effort to tap the situation for the effective utilisation of the available financial resources for local level development. The credit plan of banks should be evolved in such a way that it can be integrated with the perspective development plan of the Local Self Government. This study has focussed on to evolve a methodology and approach that can be adjusted to evolve a participatory and locally appropriate credit plan integrated with the development plan.