What changed
RBI has extended the BC/BF model to UCBs, allowing them to use intermediaries like NGOs, MFIs, post offices, and individuals for facilitation services. UCBs must meet eligibility criteria including CRAR >10%, net NPAs <5%, no CRR/SLR default, three years of continuous net profit, and at least two elected professional directors.
What it means for you
This move enables UCBs to leverage third-party agents to reach underserved customers, reducing their branch dependency and operational costs. Banks must ensure strict compliance with RBI's guidelines, including board approval and prior regional office clearance, to avoid regulatory risks. It also opens new revenue streams through fee-based facilitation services.
What you must do
- Assess your UCB's eligibility against the six criteria (CRAR, NPAs, CRR/SLR compliance, profitability, professional directors, regulatory record).
- Formulate a board‑approved scheme for engaging BCs/BFs, detailing ICT solutions and scope of activities.
- Submit the scheme to the concerned RBI Regional Office (Urban Banks Department) and obtain approval before onboarding any BC/BF.
- Ensure BCs/BFs are not directors, relatives of directors, or serving employees of the UCB.
- Monitor BC/BF activities for compliance with the permitted facilitation services.
Who it affects
Urban Co-operative Banks (UCBs), Business Correspondents and Business Facilitators (NGOs, MFIs, post offices, individuals), Customers in underserved areas of UCB operations
What are the key eligibility criteria for a UCB to engage BCs/BFs?
UCBs must have CRAR above 10%, net NPAs below 5%, no CRR/SLR default in the prior year, continuous net profit for three years, at least two elected professional directors on the board, and a satisfactory regulatory compliance record.
Can UCB directors or employees act as Business Facilitators?
No, directors of the UCB and their relatives (as defined in RBI's exposure norms) as well as serving employees are explicitly ineligible to act as Business Facilitators.
What services can a Business Facilitator provide under this model?
BFs can identify borrowers, collect and process loan applications, create awareness about savings products, promote Self Help Groups, and provide post‑sanction monitoring, among other facilitation services.