RBI Working Group says Business Correspondents (BC) Model Vital for Financial Inclusion; suggests New Entities for BC

August 19, 2009:

In the North Eastern Region, as recommended by the Committee on Financial Sector Plan (CFSP) for the North Eastern Region (Chairperson: Smt. Usha Thorat), such of those local organisations/associations not falling under any of the available entities listed in the Reserve Bank guidelines, may be considered for appointment as BCs, provided banks propose such entities after due diligence and are recommended by DLCC. The Regional Offices of the Reserve Bank will be the decision making authority in such cases.

Background:- It may be recalled that the Reserve Bank of India had, in January 2006, permitted banks to use intermediaries as Business Facilitators (BFs) or Business Correspondents (BCs) for providing financial and banking services. This was with the objective of ensuring greater financial inclusion and increasing outreach of the banking sector. As per the current guidelines, NGOs/ MFIs set up under Societies/ Trust Acts, societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, Section 25 companies that are stand alone entities or in which NBFCs, banks, telecom companies and other corporate entities or their holding companies did not have equity holdings in excess of 10 per cent, post offices and retired bank employees, ex-servicemen and retired government employees can act as BCs of banks.



The BCs are allowed to conduct banking business as agents of the banks at places other than the bank premises. In recent times, however, there were demands from various sectors that the eligible entities to act as BCs be enlarged, with a view to facilitating increased outreach of the banking system. Following this, as announced in the Annual Policy 2009-10, the Reserve Bank constituted a working group to review the Business Correspondent (BC) Model. The Working Group included officials from select commercial banks and the Reserve Bank as members and Shri P. Vijaya Bhaskar, CGM in-Charge, Department of Banking Operations and Developments as the Chairman.

The Working Group, among other things, reviewed the experiences gained in implementing the BC Model and suggested measures to enlarge the category of persons/entities that can act as BCs of banks, after examining the various regulatory and other incidental issues relating to the Model ... Read More

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