RBI Expands Business Correspondent Network for Financial Inclusion

RBI/2009-10/238 DBOD.No.BL.BC. 63 /22.01.009/2009-10 November   30, 2009 All Commercial Banks (including RRBs and LABs) Dear Sir Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) As announced in the Annual Policy Statement for the year 2009-10, a Working Group was constituted by Reserve Bank of India to examine the experience to date of the Business Correspondent (BC) model and suggest measures, to enlarge the category of persons that can act as BCs, keeping in view the regulatory and supervisory framework and consumer protection issues.  The Working Group has submitted its report which has been placed on the Bank’s website on August 19, 2009. The recommendations of the working group have since been accepted by Reserve Bank of India with slight modifications. Accordingly, banks are advised to take necessary action for implementing the various recommendations of the Working Group as indicated in the Annex . 2. Banks are permitted to appoint the following entities as BCs, in addition to the entities presently permitted: (i) Individual kirana/medical /fair price shop owners (ii) Individual Public Call Office (PCO) operators (iii) Agents of Small Savings schemes of Government of India/Insurance Companies (iv) Individuals who own Petrol Pumps (v) Retired teachers and (vi) Authorised functionaries of well run Self Help Groups (SHGs) linked to banks.   3. With a view to ensuring the viability of the BC model, banks (and not BCs) are permitted to collect reasonable service charges from the customer, in a transparent manner under a Board-approved policy. Considering the profile of the  clientele to whom banking services are being delivered through the BC model, banks should ensure that the service charges/fees collected from the customer for delivery of banking services through the BC model is not only fair and reasonable but also seen to be so. A copy of the Board-approved policy in this regard may be forwarded to us (The Chief General Manager-in-charge, Reserve Bank of India, Department of Banking Operations and Development, Central Office, World Trade Centre, Centre -1, Cuffe Parade, Colaba, Mumbai – 400 005 in the case of Scheduled Commercial Banks and LABs and The Chief General Manager, Reserve Bank of India, Rural Planning and Credit Department, Central Office, Central Office Building, 10th Floor, Shahid Bhagat Singh Marg, Mumbai – 400 001 in the case of RRBs). Banks should in particular ensure that there are no complaints from the customer about the charges being non-transparent/not reasonable. Any unfair practices adopted by banks in this regard would be viewed seriously by Reserve Bank of India. 4. With the inclusion of the above entities, it is estimated that there will be substantial addition to the available universe of BCs.  Keeping in view the operational and other risks implied, banks are advised to ensure that they carry out suitable due diligence in respect of the entities proposed to be appointed as BCs and also institute additional safeguards as may be considered appropriate to minimise the agency risks. ICT solutions that ensure proper authentication and other security measures may be adopted to minimise the risk while upscaling the model as already advised.  Further, banks may ensure that while appointing the above entities as BCs, the fundamental principle that the individuals are residents of the area in which they propose to operate as BCs, stands fulfilled. 5. As regards the North Eastern Region, it has been decided to implement the recommendation made by the Committee on Financial Sector Plan (CFSP) for the North Eastern Region(Chairperson: Smt. Usha Thorat) regarding the entities which can be appointed as BCs in the North Eastern Region.  Accordingly, where a local organization/association not falling under any of the forms of  organizations listed in the Reserve Bank guidelines is proposed to be appointed by a bank as Business Correspondent after due diligence and is recommended by the DCC for being approved as Business Correspondent, the same would be considered by the Regional Office of the Reserve Bank for granting suitable exemption from the Reserve Bank guidelines for appointing such entities as BCs.  Banks may therefore approach the Regional Director of the Reserve Bank at Guwahati for the  purpose. 6. Further, banks are also permitted to allow, with suitable and adequate safeguards, the BCs in the North Eastern Region to account for the transactions in the bank’s books latest by the end of the second working day from the date of the transaction. 7. Regarding cases referred to DCCs for relaxation of criteria in respect of the maximum distance between the place of business of the BC and the base branch,  the DCCs  may give their decision at the earliest, and in any case within a period of three months, from the date of reference to them.  In case no decision is conveyed by DCCs within this period, the banks are permitted to treat it as a ‘no objection’ for relaxation of the distance criterion. Yours faithfully (P.Vijaya Bhaskar) Chief General Manager-in-charge Encl: as stated above Annex Action required to be taken by banks based on the recommendations of the Working Group  to Review the Business Correspondent Model Sl. No.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/238 · issued 30 Nov 2009. The plain-English explanation above is BankPulse’s own independent summary.

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