What changed
Previously, BCs could handle tasks like loan processing, deposit collection, and micro-insurance sales, but not currency distribution. This circular, issued on September 2, 2013, explicitly adds distribution of banknotes and coins to the list of permissible BC activities, following the May 2013 Monetary Policy Statement which suggested exploring this avenue.
What it means for you
Banks can now leverage their BC networks to physically deliver cash to underserved areas, addressing last-mile connectivity gaps and meeting growing demand for banknotes and coins, especially in rural and remote regions. Lenders should update their BC agreements and operational guidelines to include cash handling and ensure compliance with cash management norms.
What you must do
- Update BC engagement contracts to include distribution of banknotes and coins as a permissible activity.
- Train BCs on cash handling, security protocols, and reporting requirements for currency distribution.
- Review and strengthen cash management processes to monitor BC-led currency distribution and prevent misuse.
- Consider engaging Cash-in-Transit (CIT) entities for cash logistics support, as suggested in the Monetary Policy Statement.
Who it affects
All scheduled commercial banks including RRBs and LABs, Business Correspondents (BCs) and their networks, Cash-in-Transit (CIT) entities, Rural and remote customers relying on BCs for banking services
Can BCs now distribute any amount of banknotes and coins?
The circular does not specify limits; banks should set internal caps based on risk assessment and BC capacity, ensuring compliance with existing cash management guidelines.
Do BCs need separate approval from RBI for this activity?
No separate RBI approval is required; banks can include this activity in the BC scope as per the circular, but must update their board-approved BC policy.
What about security and liability for cash handled by BCs?
Banks remain responsible for all BC actions. They must ensure BCs have adequate insurance, security arrangements, and clear accountability for cash shortages or theft.