• Only around 40 per cent of the Indian population is
currently connected to the banking system. There are over 70,000 villages (with
a population of over 2000 as per the 2001 census), which are yet unbanked.
• The RBI has issued a directive to public sector banks to
ensure that all these villages with population above 2000 be brought under the
formal banking net by 2012.
• To increase banking penetration keeping in line with its
goal of total financial inclusion, Business Correspondent (BC) model was developed
by RBI in January 2006.
• In year 2010, RBI allowed banks to appoint "for
profit" institutions like mobile service providers, NGOs, cooperative
societies and post offices as their business correspondents.
Who Can Become BC?
• BC is an intermediary between the customer and the bank.
The BC model is a type of branchless banking wherein the agents appointed by
the BCs themselves reach out to the customers on behalf of the bank. BCs are retail agents for providing banking
services at locations other than bank branches or ATMs.
• Retired bank employees, retired teachers, owners of
kirana store, retired government employees and ex-servicemen, medical, fair
price shops and individual Public Call Office (PCO) operators, among others,
are permitted to work as BCs.
Services
• BCs help big banks acquire and service customers who are
located far. BCs help banks serve populations which are too small for most
banks to service directly. BCs provide all the basic banking facilities like
saving accounts, deposits and remittances etc. BCs don’t have a portfolio of
services as expansive as the modern banking channel has.
Charges
• In November 2009, the central bank permitted banks to
charge customers reasonable fees for using BCs under board-approved policies.
The permission is likely to boost the margins of these companies and make the
sector more feasible. Till late 2009, banks were not allowed to charge
customers.
• Payments to the business correspondents are typically
modeled on a commission or percentage basis. Banks pay about Rs10 for every new
account opened and a commission of about 0.5 per cent of the value for a cash
in-cash out transaction. A fee of about Rs 40 is also paid per active customer
on an annual basis. BCs like FINO and AWL, which provide the technology
solutions, get paid a little extra.
• Most of the bigger BCs have got into disbursing
government funds and entitlements for schemes like NREGS and RSBY. These
schemes provide the prospect of adding new customers. Typically, a commission
of 1.5-1.75 per cent of the transaction value is given in the NREGS funds.
However, it varies from state to state and bank to bank.
Advantages of BCs
• Since BC services are offered at the customer’s
doorstep, it saves a great deal of time and money of customers.
• Since BCs do not represent any single bank, they offer
the best suitable products to the poor rather than push the services of a
single organization.
• BCs have developed various innovative solutions which
are cost effective and done away with the cost intensive traditional branch
based banking system.
• Inclusion of local agents has enabled BCs build
necessary local acceptance and trust among the illiterate target population.
(Published in Money Mantra)
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