Powering the Next Wave of Inclusive Growth through Business Correspondents

What types of products and services can be provided by BCs?

The roles and responsibilities of BCs can be defined under the contract between the bank and the retail agent, which may differ from other banks’ norms and conditions.

Business Correspondents are responsible for executing numerous functions, which have been explained below:

• By identifying prospective customers for the bank, business correspondents engage prospects in generating awareness among customers on the bank’s available service options and financial products.
• BCs run a small campaign at the ground level to educate and advise their customers on managing money, debt counseling and recommending small loans to target customers.
• BC also promotes, nurtures and monitors Self Help Groups, Joint Liability Groups, Credit Groups, and other cooperative societies in rural and suburban areas.

Day-to-day tasks which BCs perform

• Business correspondents collect and handle preliminary processing documents for deposits that involve verification of primary information/ data.
• They are responsible for enrolling customers for various financial products and services. This also involves filling out various applications and documents of products and services the bank provides in that area.
• Business correspondents also complete the whole “know your customer” (KYC) procedure as part of the opening formalities requiring the occasional collecting of crucial client information.
• They are authorized by the bank to provide account statements and other account-related information for a minimum period of 3 months to their customers.
• Business correspondent promotes cross-sell and promotes products through kiosk banking facilities, including mutual fund products, pension products and other such third-party products.

Disbursing and Collection through Business correspondent

• The business correspondents are accountable for collecting and paying small-value deposits and (cash) withdrawals, the maximum value of which is Rs. 2,000 per transaction, while there is no minimum limit.
• Business correspondents are responsible for handling the receipt and delivery of small-value remittances.
• Depending on bank guidelines, they are also involved in disbursing small loans, like entrepreneurial and agricultural loans.
• They are monitors and collectors for the bank’s loan customers.

Who can act as a business correspondent?

When the BC model was introduced in 2006, few institutions were authorized to function as BCs, including NGOs and MFIs established under societies or trust statutes, societies registered under the Mutually Assisted Cooperative Societies Act or the Cooperative Societies Acts of States, Section 25 businesses, and post offices. Later in 2008, the RBI refined its guidelines and included banks where banks can engage such companies as BCs, which are stand-alone entities, or Section 25 companies, in which NBFCs, banks, telecom companies, and other corporate entities or their holding companies do not have holdings in excess of 10%.

The Committee on Inclusion, which is led by Dr C. Rangarajan, thinks that banks are getting worried about the lower margins they can make on financial intermediation because there is more competition among them. They also think that small-value clients (depositors) in remote areas don’t get much help getting access to financial services.

The agency that wants to serve as BC must have a workforce that can be deployed across India. A BC agent should have strong sourcing channels such as referrals, online and offline channels, partner channels, and university and college connections.

The BC agent must have a model that assists the bank in hiring or Hire-Train-Deploy business correspondents. The BC agent is also given the infrastructure and asset service needed to set up offices all over India and run the BC model according to the bank’s rules and guidelines. A BC agent should have strong compliance norms that adhere to RBI guidelines to run the business model.

Why should Banks adopt the Business Correspondent Model?

• Low operation cost for banking service – In-person discussion with BC agent will lead to more CASA deposits at a much lower cost.
• Performing banking at a mobile location – rooted in the local community will give you a great advantage, banks will be close to their rural clients.
• Agility in service – BC provides better flexibility in terms of the delivery of financial services.
• Reactive response – BCs are more responsive to the needs and challenges of local clients.
• Local Engagement – Banks are generating local engagement through the BC model.