Wednesday, February 11, 2015

Business Correspondents

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In a country, like India, lack of access to banking / financial services is still a major challenge, specially in remote areas of the country. Even up to 65 % of the population is classified as 'Underbanked or Unbanked'.

Therefore, to meet the need of financial inclusion (to reach those population and provide banking services), a new concept of Business Correspondent / Banking Correspondent (BC) came to picture in 2006, to provide services at people's doorstep.

Business Correspondent Agent (BCA)
Business Correspondent Agent is an authorized representative of a bank, who offer banking services to those places, where the bank doesn't have a branch. Hence facilitating traditional banking services is not possible, without the help of business correspondents. BCs oversee the development and functioning of indirect banking channels in their service area.

Note, a BC need not have to affiliated to a single bank, they can provide services from more than one banks. BCs charge a commission from the bank for their services.

Scope / Activities
  • Identification of borrowers
  • collecting and preliminary processing of loan applications, including verification of primary information (generally not authorized to sanction loan)
  • creating awareness and providing financial advice / counselling
  • promoting and monitoring Self Help Groups (SHG), Joint Liability Groups (JLG), etc.
  • collecting small value deposits
  • sale of micro insurance, mutual fund (MF) products, other third party products
  • receipt and delivery of small value remittances, other payment instruments
  • other operations

  • Individuals, like retired bank employees, retired teachers, retired gov. employees, ex-serviceman, etc.
  • NGOs, MFIs set up under Societies / Trust Acts and Section 25 Companies
  • Registered Cooperative Societies
  • Post Offices
  • Companies registered under Indian Companies Act, 1956, with large and widespread retail outlets, excluding NBFCs.
Note that NBFCs are not allowed to work as a Business Correspondents (BC). However, later RBI relaxed the norms and allowed the banks to engage (only) non-deposit taking NBFCs (NBFC-ND) as BCs, subject to some conditions.

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