What changed
RBI now requires banks to progressively taper prefunding for corporate BCs and agents, targeting ~15% of limits for deposits and ~30% for bank guarantees within 2 years of starting operations. Banks must also insure cash handled by BCs, as it is considered bank cash. Boards must review BC operations, remuneration, and complaint redressal every six months.
What it means for you
Banks must shift from demanding full prefunding from BCs, which was stifling scale, to a tapering model that eases cash flow burdens on agents. This will likely boost BC transaction volumes and account usage in unbanked areas. Banks also bear insurance costs now, increasing operational expenses but aligning risk ownership.
What you must do
- Review BC prefunding limits and set a tapering schedule to reach ~15% for deposits and ~30% for bank guarantees within 2 years.
- Ensure board reviews BC operations every six months, including remuneration and complaint redressal.
- Arrange insurance for cash handled by BCs, treating it as bank cash.
- Monitor top management oversight of BC payment systems and product handling.
Who it affects
All scheduled commercial banks, Corporate BCs and BC agents, Bank boards and top management
What are the new prefunding targets for BCs?
RBI says prefunding should taper to around 15% of limits for deposits and 30% for bank guarantees within 2 years from when a BC starts operations.
Who is responsible for insuring cash handled by BCs?
Banks must insure the cash, as RBI clarifies it is bank cash, not the BC's responsibility.
How often must bank boards review BC operations?
Boards must review BC operations at least once every six months, covering prefunding, remuneration, and complaint redressal.