Remember ME - You Me and Dementia

Friday, August 21, 2009

Retired teachers, traders may make it to banks' business correspondents list

Kiranawalas, petrol pump owners and retired teachers may soon be able to function as business correspondents for banks. The move forms part of the Reserve Bank of India’s attempt to bring more of rural India in the organised credit fold. Apart from these constituents, RBI has proposed to expand the definition of business correspondent to include small saving schemes and insurance company agents too.

BCs are allowed to function as banking agents in areas devoid of bank branches. Besides enabling opening of accounts for new customers, BCs are permitted to undertake activities such as disbursal of small value credit, recovery of dues, collection of small-value deposits, sale of micro insurance, mutual funds, pension products and other third-party products, and receipt and delivery of small-value remittances/ other payment instruments.

A report by the banking regulator has also suggested that public call office (PCO) operators, self-help groups linked to banks and select non-banking finance companies could also be included under the definition of BC. These are some of the suggestions on the BC model made by a working group headed by RBI’s chief general manager Vijaya Bhaskar.

The report has dwelt on the long-term feasibility of BCs, suggesting that banks will have to relook the compensation structure of such functionaries. The report says that BCs help banks in taking their low-value, high-volume transactions out of the branch premises and to that extent there is a potential saving in costs. These savings could be passed on to the BCs. Further, it says, banks should consider bearing the initial set-up cost of the BCs and support them in the initial stages. Lenders may also need to bear the costs relating to transit insurance of the cash handled by BCs.

While making the recommendations, RBI has noted that the BC model will play a very important role for banks in achieving financial inclusion. Studies have indicated that nearly 70% of India’s population do not have bank accounts.

The working group has also noted that BCs should be used not only for opening and servicing no-frills accounts, but also for the full range of financial activities. At present, NGOs and MFIs set up under the Societies/ Trust Acts, Section 25 companies, post office and retired bank employees, former servicemen and government employees are among those eligible to become BCs.


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