• The concept of Financial Inclusion and its importance for
inclusive growth • Various initiatives taken under the Financial Inclusion
Program • The features of BC/BF model and the scope of activities of the
BCs/BFs
• The concept of group lending and other policy issues
concerning implementation of the Financial Inclusion Program.INTRODUCTION
►Financial inclusion means making sure that all people, no matter how much money they have or where they come from, can use simple and low-cost financial services. This includes services like:
• Basic bank accounts: A safe place to store money
and make payments. •A safe place to keep money for the future and earn some extra money (interest).
• Credit: Access to loans for personal or business
needs.
• Insurance: Protection against unexpected events
like illness or accidents. • Digital payments: Convenient ways to pay
for goods and services.
Need for Financial Inclusion
►
Empowers people: Control over finances, build assets, achieve goals. ► Helps people save money, grow their income, and come out of poverty. ►
Boosts economies: Increased savings, investment, and entrepreneurship. ► Creates jobs: Supports small
businesses and economic growth. ► Gives everyone a fair chance to improve their life. ► Increases stability:
Strengthens financial systems and reduces risks.
Financial exclusion
Financial exclusion
► Financial exclusion happens when people cannot get or use important financial services. Here’s what it means:
• Limited Access:
• Bank accounts: Difficulty opening or maintaining a
basic bank account, hindering saving, bill payments, and accessing other
services.
• Credit: Inability to obtain loans for emergencies,
education, or business, limiting opportunities and increasing
vulnerability to predatory lenders.
• Insurance: Lack of access to affordable insurance
to protect against risks, leaving individuals exposed to financial
hardship from unexpected events.
• Other services: Exclusion from investment products,
retirement planning, and other services that build long-term financial
well-being.
Financial exclusion
► Who's
Affected:
• Low-income: Financial constraints limit access and
affordability of services.
• Remote communities: Geographical distance and lack
of infrastructure create barriers.
• Elderly: May face technological, mobility, or
cognitive challenges. • Minorities: Can experience discrimination or
language barriers. • Disabled: May encounter physical or attitudinal
barriers.
Why is Financial Inclusion Important?
► Financial
inclusion is crucial because it empowers people to: • Manage their finances
effectively: Pay bills, save for goals, and avoid debt.
• Build assets and reduce poverty: Start businesses,
invest in education, and improve their living standards.
• Cope with financial shocks: Handle emergencies and
unexpected expenses.
• Take part in earning, spending, and sharing the benefits of economic growth.Business Correspondent/Business Facilitator (BC/BF)
Model
► 1.
The Challenge of Financial Exclusion
• Geographic Barriers:
• Many people in India, particularly in rural areas, live
in villages that are far from bank branches.
• Traveling long distances to access banking services can
be time-consuming, expensive, and inconvenient, especially for those with
limited mobility or resources.
• Lack of Awareness and Financial Literacy:
• A significant portion of the population, especially in
rural areas and among marginalized communities, may not be aware of the
benefits of formal financial services.
• They may not understand how savings accounts, loans,
insurance, and other financial products can help them improve their lives
and escape poverty.
• Low levels of literacy and financial literacy can make
it difficult for people to understand banking procedures and make
informed financial decisions.
• Complex Procedures and Requirements: Traditional
banking often involves complex procedures,
documentation requirements,
and eligibility criteria that can be challenging for people with limited education or financial experience
Business Correspondent/Business Facilitator (BC/BF)
Model
► 2. The
BC/BF Model: A Solution
• Bridging the Gap:
• The BC/BF model is designed to address these challenges by
bringing banking services directly to underserved communities.
• It acts as a bridge between the formal financial system
and the excluded population, making banking more accessible and
convenient.
• Leveraging Local Networks:
• BC/BF agents are typically individuals or institutions
that are already present and trusted within the local community. This
could include:
• Shopkeepers
• Teachers
• Post office staff
• Members of self-help groups (SHGs)
• NGO workers
• By leveraging these existing networks, the BC/BF model can
reach people who might otherwise be reluctant to interact with formal
financial institutions.
Business Correspondent/Business Facilitator (BC/BF)
Model
► 3.
Types of Agents and Their Roles
• Business Correspondents (BCs):
• Authorized to carry out a wider range of financial
transactions on behalf of the bank, including: • Cash deposits and
withdrawals
• Disbursal of small value loans
• Collection of loan repayments
• Sale of micro-insurance and other financial products
• Often equipped with point-of-sale (POS) terminals or
mobile devices to carry out transactions electronically. • Business
Facilitators (BFs):
• Primarily focus on non-financial services, such
as:
• Identifying potential borrowers and helping them with loan
applications
• Providing financial education and counseling
• Promoting financial literacy and awareness
• Facilitating the formation and operation of SHGs
• Play a crucial role in building trust and confidence in
the formal financial system.
Business Correspondent/Business Facilitator (BC/BF)
Model
► 4.
Benefits of the BC/BF Model
• Increased Access:
• Expands the reach of financial services to remote and
unbanked areas, enabling more people to open bank accounts, save money,
and access credit.
• Convenience:
• People can access banking services closer to their homes,
saving them time and travel costs.
• This is particularly beneficial for women, the elderly,
and people with disabilities who may face difficulties in traveling long
distances.
• Personalized Service: BC/BF agents can provide
personalized financial advice and guidance tailored to the specific needs
of individual customers.
• They can also help customers understand complex banking
procedures and make informed financial decisions.► 4.
Benefits of the BC/BF Model CONTED….
► Cost-Effectiveness:
► Compared
to setting up and maintaining traditional bank branches, the BC/BF model
is a more cost-effective way to deliver financial services to underserved
areas.This allows banks to reach a wider customer base without incurring
significant overhead costs.
• Economic Empowerment:
• By providing access to credit and other financial tools,
the BC/BF model empowers people to start businesses, invest in education,
and improve their livelihoods.
• This can lead to increased income, reduced poverty, and
greater economic opportunities for individuals and communities.Business Correspondent/Business Facilitator (BC/BF)
Model
► 5.
Ensuring Effectiveness and Security
• Regulation and Supervision:
• The Reserve Bank of India (RBI) has established clear
guidelines(RBI Guidelines: In 2006) and regulations for BC/BF operations
to ensure transparency, security, and customer protection.
• Banks are responsible for monitoring the activities of
their BC/BF agents and ensuring compliance with these regulations.
• Technology:
• The use of technology, such as biometric authentication,
secure mobile banking platforms, and real-time transaction monitoring,
enhances the security and efficiency of BC/BF operations.
• Technology also helps to reduce the risk of fraud and
ensures that transactions are conducted in a transparent manner.
• Training and Capacity Building:
• BC/BF agents receive comprehensive training on financial
products, services, customer service, and regulatory compliance.
• This training equips them with the knowledge and skills
needed to effectively serve their communities and promote financial
inclusion.Core Roles and Responsibilities: BC/BF
1. Intermediary:
The BC/BF acts as a vital link between the bank and the
community, especially in areas without a bank branch. They bridge the
gap, making financial services accessible to those who may find it
difficult to reach a traditional bank.
2. Information Gatherer and Analyst:
► For
loan applications, the BC/BF collects detailed information about the
prospective borrower, including:
► Personal
and family details
► Economic
activities and income sources
► Landholding
and agricultural practices (if applicable)
► Cash
flow and spending patterns
► This
information is used to create a comprehensive borrower profile, which helps the
bank assess creditworthiness and make informed lending decisions.
► The
BC/BF may also help prepare cash flow statements and budgets, equipping the
customer with better financial understanding.Core Roles and Responsibilities: BC/BF
3. Counselor and Educator:
• BC/BFs provide guidance on financial matters, helping
customers understand their needs and how different products and services
can meet those needs.
• They educate customers about various banking products,
ensuring they have the information necessary to make informed
choices.
4.Ethical and Transparent Conduct:
• BC/BFs are expected to provide accurate and truthful
information about the bank and its products.
• They must not withhold crucial information or mislead
customers.
• They are responsible for maintaining customer
confidentiality and protecting their privacy while adhering to the bank's
regulations and guidelines.
• They must treat all customers fairly and with respect,
without any discrimination based on caste, religion, or other factors.
Specific Duties and Activities: BC /BF
► In
addition to the core roles, BC/BFs perform these key tasks: 1. Loan
Facilitation:
► Identify
potential borrowers.
► Assess
the suitability of the borrower's proposed activities for a loan.
► Educate
borrowers about loan products and help them choose the most appropriate one. ► Assist in completing loan
applications and ensure all required information is provided.
► Adhere
to KYC (Know Your Customer) guidelines for proper identification and
verification.
► Process
loan applications and submit them to the bank.
► Conduct
pre- and post-disbursal verification and monitor loan accounts. ► Follow up on loan repayments
and assist with recovery if needed.
BUSINESS CORRESPONDENTS SCOPE OF
ACTIVITIES
•Account-related:
•Collecting small value
deposits
•Distributing banknotes and coins (acting as a
small-scale ATM)
► Loan-related:
► Identifying
potential borrowers
► Collecting
and preliminary processing of loan applications ► Verifying basic information/data of
applicants ► Processing
and submitting loan applications to the bank ► Disbursing small value loans
► Collecting
loan principal and interest repayments ►
Post-sanction monitoring of loan accounts
► Following
up on loan recovery
BUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
Other Financial Services:
► Creating
awareness about savings and other bank products ►
Educating and advising customers on managing money and debt
► Selling
micro-insurance, mutual fund products, pension products, and other
third-party financial products
► Receiving
and delivering small value remittances and other payment
instruments
Promoting Financial Inclusion:
► Promoting,
nurturing, and monitoring Self-Help Groups (SHGs), Joint Liability Groups
(JLGs), and other community-based financial groupsBUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
► Risk
Mitigation
► Since
BCs handle financial transactions on behalf of the bank, there are inherent
risks. Banks take these measures to mitigate them:
• Cash Limits: Set limits on the amount of cash a BC can
hold at any given time.
• Transaction Limits: Set limits on individual payments and
receipts.
• Transaction Accounting: Ensure all BC transactions are
properly recorded and reconciled with the bank's systems in a timely
manner.
• Bank Responsibility: Clearly state in customer agreements
that the bank is ultimately responsible for the actions of its BCs,
providing a layer of protection for customers.
Reserve Bank of India's (RBI) guidelines for Business
Correspondents (BCs).
► 1.
Customer Confidentiality
• Protection of Information: Banks must ensure that BCs
protect the confidentiality and security of customer information in their
possession. This includes personal details, financial records, and
transaction history.
• Data Privacy: BCs need to handle customer data responsibly
and prevent any unauthorized access, disclosure, or misuse.
► 2.
Information Technology Standards
• High-Quality Equipment: Banks must ensure that BCs use
reliable and secure technology for their operations. This includes POS
terminals, mobile devices, and any other equipment used to process
transactions or store customer data.
• Secure Technology Infrastructure: BCs should have
appropriate security measures in place to protect against cyber threats
and data breaches.► 3.
Distance Criterion (Oversight and Supervision)
• Base Branch: Each BC (or their retail outlet/sub-agent)
must be attached to a specific bank branch designated as the "base
branch." This branch is responsible for overseeing the BC's
activities and ensuring compliance with regulations.
• Distance Limits: Originally, there were distance limits
between the BC's place of business and the base branch (30 km in
rural/semi-urban/urban areas and 5 km in metropolitan centers). This was
to ensure adequate supervision.
• Relaxation of Distance Criteria: Recognizing the need for
flexibility and advancements in technology, the RBI has removed the
strict distance criteria for domestic scheduled commercial banks.
• Oversight and Service Provision: Banks now have more
flexibility in determining the location of BCs, but they must still
prioritize:
• Adequate oversight: Ensuring proper supervision of BC
operations.
• Effective service provision: Making sure BCs can
effectively serve customers in their designated areas.
Ultra Small Branches:
► An
Enhancement to the BC Model Purpose: To provide better support and oversight
to Business Correspondents (BCs) operating in rural areas.
► Structure:
These are small, low-cost physical structures ("brick and
mortar") located in rural centers. They serve as a middle ground
between the main bank branch and the individual BC locations.
► Support
for BCs: Each Ultra Small Branch supports a cluster of about 8-10 BC
units within a reasonable distance (3-4 kilometers).
Ultra Small Branches:
• Functions:
• Provide basic banking infrastructure like a Core Banking
Solution (CBS) terminal, passbook printer, and a safe for cash.
• Managed by bank officers/employees, ensuring proper
oversight and support for BC operations.
• Facilitate efficient cash management, documentation, and
customer grievance redressal. • Benefits:
• Enhanced Supervision: Allows closer supervision of BC
activities compared to relying solely on the main branch.
• Improved Service Quality: Ensures better service delivery
and customer support in rural areas.
• Increased Credibility: The physical presence of an Ultra
Small Branch increases the legitimacy of BCs operating in the area,
building trust among customers.INITIATIVES OF RESERVE BANK OF INDIA
The Reserve Bank of India in its annual policy statement of
April 2005 recognized the problem of financial exclusion and initiated
several steps. Some of the major initiatives aimed at promotion of
financial inclusion include:
► Introduction
of basic savings bank deposit account (BSBDA) either with nil or very low
balances as well as charges that make such accounts accessible to vast
sections of population.
► A
simplified general purpose credit card (GCC) facility to be issued by
banks without insistence on collateral or purpose.
► Launching
Self-help Group scheme.
► Simplified
"Know Your Customer (KYC)" norms.
► Relaxations
in Branch Licensing Policy.
Microfinance Institutions (MFIs)
► MFIs
are organizations that provide financial services to low-income
individuals and communities who traditionally lack access to banking
services. Think of them as specialized institutions catering to those
often excluded from mainstream finance.
► Collateral-free:
► This
means the loan is given without the borrower having to pledge any assets
(like land or jewelry) as security. This makes it easier for poor people to
access credit, as they often don't own valuable assets.
► Household
income limit:
► The
combined annual income of the household (husband, wife, and unmarried
children) must be Rs. 3,00,000 or less to qualify for a microfinance loan.
This ensures that the loans are targeted towards those who need them
most.
• The concept of Financial Inclusion and its importance for
inclusive growth • Various initiatives taken under the Financial Inclusion
Program • The features of BC/BF model and the scope of activities of the
BCs/BFs
• The concept of group lending and other policy issues
concerning implementation of the Financial Inclusion Program.
INTRODUCTION
►Financial inclusion means making sure that all people, no matter how much money they have or where they come from, can use simple and low-cost financial services. This includes services like:
• Basic bank accounts: A safe place to store money
and make payments. •A safe place to keep money for the future and earn some extra money (interest).
• Credit: Access to loans for personal or business
needs.
• Insurance: Protection against unexpected events
like illness or accidents. • Digital payments: Convenient ways to pay
for goods and services.
Need for Financial Inclusion
►
Empowers people: Control over finances, build assets, achieve goals. ► Helps people save money, grow their income, and come out of poverty. ►
Boosts economies: Increased savings, investment, and entrepreneurship. ► Creates jobs: Supports small
businesses and economic growth. ► Gives everyone a fair chance to improve their life. ► Increases stability:
Strengthens financial systems and reduces risks.
Financial exclusion
Financial exclusion
► Financial exclusion happens when people cannot get or use important financial services. Here’s what it means:
• Limited Access:
• Bank accounts: Difficulty opening or maintaining a
basic bank account, hindering saving, bill payments, and accessing other
services.
• Credit: Inability to obtain loans for emergencies, education, or business, limiting opportunities and increasing vulnerability to predatory lenders.
• Insurance: Lack of access to affordable insurance to protect against risks, leaving individuals exposed to financial hardship from unexpected events.
• Other services: Exclusion from investment products, retirement planning, and other services that build long-term financial well-being.
Financial exclusion
• Credit: Inability to obtain loans for emergencies, education, or business, limiting opportunities and increasing vulnerability to predatory lenders.
• Insurance: Lack of access to affordable insurance to protect against risks, leaving individuals exposed to financial hardship from unexpected events.
• Other services: Exclusion from investment products, retirement planning, and other services that build long-term financial well-being.
Financial exclusion
► Who's Affected:
• Low-income: Financial constraints limit access and
affordability of services.
• Remote communities: Geographical distance and lack
of infrastructure create barriers.
• Elderly: May face technological, mobility, or
cognitive challenges. • Minorities: Can experience discrimination or
language barriers. • Disabled: May encounter physical or attitudinal
barriers.
Why is Financial Inclusion Important?
► Financial
inclusion is crucial because it empowers people to: • Manage their finances
effectively: Pay bills, save for goals, and avoid debt.
• Build assets and reduce poverty: Start businesses, invest in education, and improve their living standards.
• Cope with financial shocks: Handle emergencies and unexpected expenses.
• Take part in earning, spending, and sharing the benefits of economic growth.
• Build assets and reduce poverty: Start businesses, invest in education, and improve their living standards.
• Cope with financial shocks: Handle emergencies and unexpected expenses.
• Take part in earning, spending, and sharing the benefits of economic growth.
Business Correspondent/Business Facilitator (BC/BF) Model
► 1. The Challenge of Financial Exclusion
• Geographic Barriers:
• Many people in India, particularly in rural areas, live in villages that are far from bank branches.
• Traveling long distances to access banking services can be time-consuming, expensive, and inconvenient, especially for those with limited mobility or resources.
• Lack of Awareness and Financial Literacy:
• A significant portion of the population, especially in rural areas and among marginalized communities, may not be aware of the benefits of formal financial services.
• They may not understand how savings accounts, loans, insurance, and other financial products can help them improve their lives and escape poverty.
• Low levels of literacy and financial literacy can make it difficult for people to understand banking procedures and make informed financial decisions.
• Complex Procedures and Requirements: Traditional banking often involves complex procedures,
documentation requirements, and eligibility criteria that can be challenging for people with limited education or financial experience
Business Correspondent/Business Facilitator (BC/BF) Model
• Many people in India, particularly in rural areas, live in villages that are far from bank branches.
• Traveling long distances to access banking services can be time-consuming, expensive, and inconvenient, especially for those with limited mobility or resources.
• Lack of Awareness and Financial Literacy:
• A significant portion of the population, especially in rural areas and among marginalized communities, may not be aware of the benefits of formal financial services.
• They may not understand how savings accounts, loans, insurance, and other financial products can help them improve their lives and escape poverty.
• Low levels of literacy and financial literacy can make it difficult for people to understand banking procedures and make informed financial decisions.
• Complex Procedures and Requirements: Traditional banking often involves complex procedures,
documentation requirements, and eligibility criteria that can be challenging for people with limited education or financial experience
Business Correspondent/Business Facilitator (BC/BF) Model
► 2. The BC/BF Model: A Solution
• Bridging the Gap:
• The BC/BF model is designed to address these challenges by bringing banking services directly to underserved communities.
• It acts as a bridge between the formal financial system and the excluded population, making banking more accessible and convenient.
• Leveraging Local Networks:
• BC/BF agents are typically individuals or institutions that are already present and trusted within the local community. This could include:
• Shopkeepers
• Teachers
• Post office staff
• Members of self-help groups (SHGs)
• NGO workers
• By leveraging these existing networks, the BC/BF model can reach people who might otherwise be reluctant to interact with formal financial institutions.
• The BC/BF model is designed to address these challenges by bringing banking services directly to underserved communities.
• It acts as a bridge between the formal financial system and the excluded population, making banking more accessible and convenient.
• Leveraging Local Networks:
• BC/BF agents are typically individuals or institutions that are already present and trusted within the local community. This could include:
• Shopkeepers
• Teachers
• Post office staff
• Members of self-help groups (SHGs)
• NGO workers
• By leveraging these existing networks, the BC/BF model can reach people who might otherwise be reluctant to interact with formal financial institutions.
Business Correspondent/Business Facilitator (BC/BF) Model
► 3.
Types of Agents and Their Roles
• Business Correspondents (BCs):
• Authorized to carry out a wider range of financial transactions on behalf of the bank, including: • Cash deposits and withdrawals
• Disbursal of small value loans
• Collection of loan repayments
• Sale of micro-insurance and other financial products
• Often equipped with point-of-sale (POS) terminals or mobile devices to carry out transactions electronically. • Business Facilitators (BFs):
• Primarily focus on non-financial services, such as:
• Identifying potential borrowers and helping them with loan applications
• Providing financial education and counseling
• Promoting financial literacy and awareness
• Facilitating the formation and operation of SHGs
• Play a crucial role in building trust and confidence in the formal financial system.
• Business Correspondents (BCs):
• Authorized to carry out a wider range of financial transactions on behalf of the bank, including: • Cash deposits and withdrawals
• Disbursal of small value loans
• Collection of loan repayments
• Sale of micro-insurance and other financial products
• Often equipped with point-of-sale (POS) terminals or mobile devices to carry out transactions electronically. • Business Facilitators (BFs):
• Primarily focus on non-financial services, such as:
• Identifying potential borrowers and helping them with loan applications
• Providing financial education and counseling
• Promoting financial literacy and awareness
• Facilitating the formation and operation of SHGs
• Play a crucial role in building trust and confidence in the formal financial system.
Business Correspondent/Business Facilitator (BC/BF) Model
► 4.
Benefits of the BC/BF Model
• Increased Access:
• Expands the reach of financial services to remote and unbanked areas, enabling more people to open bank accounts, save money, and access credit.
• Convenience:
• People can access banking services closer to their homes, saving them time and travel costs.
• This is particularly beneficial for women, the elderly, and people with disabilities who may face difficulties in traveling long distances.
• Personalized Service: BC/BF agents can provide personalized financial advice and guidance tailored to the specific needs of individual customers.
• They can also help customers understand complex banking procedures and make informed financial decisions.
• Increased Access:
• Expands the reach of financial services to remote and unbanked areas, enabling more people to open bank accounts, save money, and access credit.
• Convenience:
• People can access banking services closer to their homes, saving them time and travel costs.
• This is particularly beneficial for women, the elderly, and people with disabilities who may face difficulties in traveling long distances.
• Personalized Service: BC/BF agents can provide personalized financial advice and guidance tailored to the specific needs of individual customers.
• They can also help customers understand complex banking procedures and make informed financial decisions.
► 4.
Benefits of the BC/BF Model CONTED….
► Cost-Effectiveness:
► Compared to setting up and maintaining traditional bank branches, the BC/BF model is a more cost-effective way to deliver financial services to underserved areas.This allows banks to reach a wider customer base without incurring significant overhead costs.
• Economic Empowerment:
• By providing access to credit and other financial tools, the BC/BF model empowers people to start businesses, invest in education, and improve their livelihoods.
• This can lead to increased income, reduced poverty, and greater economic opportunities for individuals and communities.
► Cost-Effectiveness:
► Compared to setting up and maintaining traditional bank branches, the BC/BF model is a more cost-effective way to deliver financial services to underserved areas.This allows banks to reach a wider customer base without incurring significant overhead costs.
• Economic Empowerment:
• By providing access to credit and other financial tools, the BC/BF model empowers people to start businesses, invest in education, and improve their livelihoods.
• This can lead to increased income, reduced poverty, and greater economic opportunities for individuals and communities.
Business Correspondent/Business Facilitator (BC/BF) Model
► 5.
Ensuring Effectiveness and Security
• Regulation and Supervision:
• The Reserve Bank of India (RBI) has established clear guidelines(RBI Guidelines: In 2006) and regulations for BC/BF operations to ensure transparency, security, and customer protection.
• Banks are responsible for monitoring the activities of their BC/BF agents and ensuring compliance with these regulations.
• Technology:
• The use of technology, such as biometric authentication, secure mobile banking platforms, and real-time transaction monitoring, enhances the security and efficiency of BC/BF operations.
• Technology also helps to reduce the risk of fraud and ensures that transactions are conducted in a transparent manner.
• Training and Capacity Building:
• BC/BF agents receive comprehensive training on financial products, services, customer service, and regulatory compliance.
• This training equips them with the knowledge and skills needed to effectively serve their communities and promote financial inclusion.
• Regulation and Supervision:
• The Reserve Bank of India (RBI) has established clear guidelines(RBI Guidelines: In 2006) and regulations for BC/BF operations to ensure transparency, security, and customer protection.
• Banks are responsible for monitoring the activities of their BC/BF agents and ensuring compliance with these regulations.
• Technology:
• The use of technology, such as biometric authentication, secure mobile banking platforms, and real-time transaction monitoring, enhances the security and efficiency of BC/BF operations.
• Technology also helps to reduce the risk of fraud and ensures that transactions are conducted in a transparent manner.
• Training and Capacity Building:
• BC/BF agents receive comprehensive training on financial products, services, customer service, and regulatory compliance.
• This training equips them with the knowledge and skills needed to effectively serve their communities and promote financial inclusion.
Core Roles and Responsibilities: BC/BF
1. Intermediary:
The BC/BF acts as a vital link between the bank and the
community, especially in areas without a bank branch. They bridge the
gap, making financial services accessible to those who may find it
difficult to reach a traditional bank.
2. Information Gatherer and Analyst:
► For
loan applications, the BC/BF collects detailed information about the
prospective borrower, including:
► Personal
and family details
► Economic
activities and income sources
► Landholding
and agricultural practices (if applicable)
► Cash
flow and spending patterns
► This
information is used to create a comprehensive borrower profile, which helps the
bank assess creditworthiness and make informed lending decisions.
► The
BC/BF may also help prepare cash flow statements and budgets, equipping the
customer with better financial understanding.Core Roles and Responsibilities: BC/BF
3. Counselor and Educator:
• BC/BFs provide guidance on financial matters, helping
customers understand their needs and how different products and services
can meet those needs.
• They educate customers about various banking products,
ensuring they have the information necessary to make informed
choices.
4.Ethical and Transparent Conduct:
• BC/BFs are expected to provide accurate and truthful
information about the bank and its products.
• They must not withhold crucial information or mislead
customers.
• They are responsible for maintaining customer
confidentiality and protecting their privacy while adhering to the bank's
regulations and guidelines.
• They must treat all customers fairly and with respect,
without any discrimination based on caste, religion, or other factors.
Specific Duties and Activities: BC /BF
► In
addition to the core roles, BC/BFs perform these key tasks: 1. Loan
Facilitation:
► Identify
potential borrowers.
► Assess
the suitability of the borrower's proposed activities for a loan.
► Educate
borrowers about loan products and help them choose the most appropriate one. ► Assist in completing loan
applications and ensure all required information is provided.
► Adhere
to KYC (Know Your Customer) guidelines for proper identification and
verification.
► Process
loan applications and submit them to the bank.
► Conduct
pre- and post-disbursal verification and monitor loan accounts. ► Follow up on loan repayments
and assist with recovery if needed.
BUSINESS CORRESPONDENTS SCOPE OF
ACTIVITIES
•Account-related:
•Collecting small value
deposits
•Distributing banknotes and coins (acting as a
small-scale ATM)
► Loan-related:
► Identifying
potential borrowers
► Collecting
and preliminary processing of loan applications ► Verifying basic information/data of
applicants ► Processing
and submitting loan applications to the bank ► Disbursing small value loans
► Collecting
loan principal and interest repayments ►
Post-sanction monitoring of loan accounts
► Following
up on loan recovery
BUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
Other Financial Services:
► Creating
awareness about savings and other bank products ►
Educating and advising customers on managing money and debt
► Selling
micro-insurance, mutual fund products, pension products, and other
third-party financial products
► Receiving
and delivering small value remittances and other payment
instruments
Promoting Financial Inclusion:
► Promoting,
nurturing, and monitoring Self-Help Groups (SHGs), Joint Liability Groups
(JLGs), and other community-based financial groupsBUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
► Risk
Mitigation
► Since
BCs handle financial transactions on behalf of the bank, there are inherent
risks. Banks take these measures to mitigate them:
• Cash Limits: Set limits on the amount of cash a BC can
hold at any given time.
• Transaction Limits: Set limits on individual payments and
receipts.
• Transaction Accounting: Ensure all BC transactions are
properly recorded and reconciled with the bank's systems in a timely
manner.
• Bank Responsibility: Clearly state in customer agreements
that the bank is ultimately responsible for the actions of its BCs,
providing a layer of protection for customers.
Reserve Bank of India's (RBI) guidelines for Business
Correspondents (BCs).
► 1.
Customer Confidentiality
• Protection of Information: Banks must ensure that BCs
protect the confidentiality and security of customer information in their
possession. This includes personal details, financial records, and
transaction history.
• Data Privacy: BCs need to handle customer data responsibly
and prevent any unauthorized access, disclosure, or misuse.
► 2.
Information Technology Standards
• High-Quality Equipment: Banks must ensure that BCs use
reliable and secure technology for their operations. This includes POS
terminals, mobile devices, and any other equipment used to process
transactions or store customer data.
• Secure Technology Infrastructure: BCs should have
appropriate security measures in place to protect against cyber threats
and data breaches.► 3.
Distance Criterion (Oversight and Supervision)
• Base Branch: Each BC (or their retail outlet/sub-agent)
must be attached to a specific bank branch designated as the "base
branch." This branch is responsible for overseeing the BC's
activities and ensuring compliance with regulations.
• Distance Limits: Originally, there were distance limits
between the BC's place of business and the base branch (30 km in
rural/semi-urban/urban areas and 5 km in metropolitan centers). This was
to ensure adequate supervision.
• Relaxation of Distance Criteria: Recognizing the need for
flexibility and advancements in technology, the RBI has removed the
strict distance criteria for domestic scheduled commercial banks.
• Oversight and Service Provision: Banks now have more
flexibility in determining the location of BCs, but they must still
prioritize:
• Adequate oversight: Ensuring proper supervision of BC
operations.
• Effective service provision: Making sure BCs can
effectively serve customers in their designated areas.
Ultra Small Branches:
► An
Enhancement to the BC Model Purpose: To provide better support and oversight
to Business Correspondents (BCs) operating in rural areas.
► Structure:
These are small, low-cost physical structures ("brick and
mortar") located in rural centers. They serve as a middle ground
between the main bank branch and the individual BC locations.
► Support
for BCs: Each Ultra Small Branch supports a cluster of about 8-10 BC
units within a reasonable distance (3-4 kilometers).
Ultra Small Branches:
• Functions:
• Provide basic banking infrastructure like a Core Banking
Solution (CBS) terminal, passbook printer, and a safe for cash.
• Managed by bank officers/employees, ensuring proper
oversight and support for BC operations.
• Facilitate efficient cash management, documentation, and
customer grievance redressal. • Benefits:
• Enhanced Supervision: Allows closer supervision of BC
activities compared to relying solely on the main branch.
• Improved Service Quality: Ensures better service delivery
and customer support in rural areas.
• Increased Credibility: The physical presence of an Ultra
Small Branch increases the legitimacy of BCs operating in the area,
building trust among customers.INITIATIVES OF RESERVE BANK OF INDIA
The Reserve Bank of India in its annual policy statement of
April 2005 recognized the problem of financial exclusion and initiated
several steps. Some of the major initiatives aimed at promotion of
financial inclusion include:
► Introduction
of basic savings bank deposit account (BSBDA) either with nil or very low
balances as well as charges that make such accounts accessible to vast
sections of population.
► A
simplified general purpose credit card (GCC) facility to be issued by
banks without insistence on collateral or purpose.
► Launching
Self-help Group scheme.
► Simplified
"Know Your Customer (KYC)" norms.
► Relaxations
in Branch Licensing Policy.
Microfinance Institutions (MFIs)
► MFIs
are organizations that provide financial services to low-income
individuals and communities who traditionally lack access to banking
services. Think of them as specialized institutions catering to those
often excluded from mainstream finance.
► Collateral-free:
► This
means the loan is given without the borrower having to pledge any assets
(like land or jewelry) as security. This makes it easier for poor people to
access credit, as they often don't own valuable assets.
► Household
income limit:
► The
combined annual income of the household (husband, wife, and unmarried
children) must be Rs. 3,00,000 or less to qualify for a microfinance loan.
This ensures that the loans are targeted towards those who need them
most.
► The BC/BF may also help prepare cash flow statements and budgets, equipping the customer with better financial understanding.
Core Roles and Responsibilities: BC/BF
3. Counselor and Educator:• BC/BFs provide guidance on financial matters, helping customers understand their needs and how different products and services can meet those needs.
• They educate customers about various banking products, ensuring they have the information necessary to make informed choices.
4.Ethical and Transparent Conduct:
• BC/BFs are expected to provide accurate and truthful information about the bank and its products.
• They must not withhold crucial information or mislead customers.
• They are responsible for maintaining customer confidentiality and protecting their privacy while adhering to the bank's regulations and guidelines.
• They must treat all customers fairly and with respect, without any discrimination based on caste, religion, or other factors.
Specific Duties and Activities: BC /BF
► In addition to the core roles, BC/BFs perform these key tasks: 1. Loan Facilitation:► Identify potential borrowers.
► Assess the suitability of the borrower's proposed activities for a loan.
► Educate borrowers about loan products and help them choose the most appropriate one. ► Assist in completing loan applications and ensure all required information is provided.
► Adhere to KYC (Know Your Customer) guidelines for proper identification and verification.
► Process loan applications and submit them to the bank.
► Conduct
pre- and post-disbursal verification and monitor loan accounts. ► Follow up on loan repayments
and assist with recovery if needed.
•Account-related:
•Collecting small value
deposits
•Distributing banknotes and coins (acting as a small-scale ATM)
► Loan-related:
► Identifying potential borrowers
► Collecting and preliminary processing of loan applications ► Verifying basic information/data of applicants ► Processing and submitting loan applications to the bank ► Disbursing small value loans
► Collecting loan principal and interest repayments ► Post-sanction monitoring of loan accounts
► Following up on loan recovery
► Creating awareness about savings and other bank products ► Educating and advising customers on managing money and debt
► Selling micro-insurance, mutual fund products, pension products, and other third-party financial products
► Receiving and delivering small value remittances and other payment instruments
Promoting Financial Inclusion:
► Promoting, nurturing, and monitoring Self-Help Groups (SHGs), Joint Liability Groups (JLGs), and other community-based financial groups
BUSINESS CORRESPONDENTS SCOPE OF
ACTIVITIES•Account-related:
•Collecting small value
deposits
•Distributing banknotes and coins (acting as a small-scale ATM)
► Loan-related:
► Identifying potential borrowers
► Collecting and preliminary processing of loan applications ► Verifying basic information/data of applicants ► Processing and submitting loan applications to the bank ► Disbursing small value loans
► Collecting loan principal and interest repayments ► Post-sanction monitoring of loan accounts
► Following up on loan recovery
BUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
Other Financial Services:► Creating awareness about savings and other bank products ► Educating and advising customers on managing money and debt
► Selling micro-insurance, mutual fund products, pension products, and other third-party financial products
► Receiving and delivering small value remittances and other payment instruments
Promoting Financial Inclusion:
► Promoting, nurturing, and monitoring Self-Help Groups (SHGs), Joint Liability Groups (JLGs), and other community-based financial groups
BUSINESS CORRESPONDENTS SCOPE OF ACTIVITIES
► Risk
Mitigation
► Since BCs handle financial transactions on behalf of the bank, there are inherent risks. Banks take these measures to mitigate them:
• Cash Limits: Set limits on the amount of cash a BC can hold at any given time.
• Transaction Limits: Set limits on individual payments and receipts.
• Transaction Accounting: Ensure all BC transactions are properly recorded and reconciled with the bank's systems in a timely manner.
• Bank Responsibility: Clearly state in customer agreements that the bank is ultimately responsible for the actions of its BCs, providing a layer of protection for customers.
Reserve Bank of India's (RBI) guidelines for Business
Correspondents (BCs).
► 1.
Customer Confidentiality
• Protection of Information: Banks must ensure that BCs protect the confidentiality and security of customer information in their possession. This includes personal details, financial records, and transaction history.
• Data Privacy: BCs need to handle customer data responsibly and prevent any unauthorized access, disclosure, or misuse.
► 2. Information Technology Standards
• High-Quality Equipment: Banks must ensure that BCs use reliable and secure technology for their operations. This includes POS terminals, mobile devices, and any other equipment used to process transactions or store customer data.
• Secure Technology Infrastructure: BCs should have appropriate security measures in place to protect against cyber threats and data breaches.
► Since BCs handle financial transactions on behalf of the bank, there are inherent risks. Banks take these measures to mitigate them:
• Cash Limits: Set limits on the amount of cash a BC can hold at any given time.
• Transaction Limits: Set limits on individual payments and receipts.
• Transaction Accounting: Ensure all BC transactions are properly recorded and reconciled with the bank's systems in a timely manner.
• Bank Responsibility: Clearly state in customer agreements that the bank is ultimately responsible for the actions of its BCs, providing a layer of protection for customers.
Reserve Bank of India's (RBI) guidelines for Business
Correspondents (BCs).
► 1.
Customer Confidentiality • Protection of Information: Banks must ensure that BCs protect the confidentiality and security of customer information in their possession. This includes personal details, financial records, and transaction history.
• Data Privacy: BCs need to handle customer data responsibly and prevent any unauthorized access, disclosure, or misuse.
► 2. Information Technology Standards
• High-Quality Equipment: Banks must ensure that BCs use reliable and secure technology for their operations. This includes POS terminals, mobile devices, and any other equipment used to process transactions or store customer data.
• Secure Technology Infrastructure: BCs should have appropriate security measures in place to protect against cyber threats and data breaches.
► 3.
Distance Criterion (Oversight and Supervision)
• Base Branch: Each BC (or their retail outlet/sub-agent) must be attached to a specific bank branch designated as the "base branch." This branch is responsible for overseeing the BC's activities and ensuring compliance with regulations.
• Distance Limits: Originally, there were distance limits between the BC's place of business and the base branch (30 km in rural/semi-urban/urban areas and 5 km in metropolitan centers). This was to ensure adequate supervision.
• Relaxation of Distance Criteria: Recognizing the need for flexibility and advancements in technology, the RBI has removed the strict distance criteria for domestic scheduled commercial banks.
• Oversight and Service Provision: Banks now have more flexibility in determining the location of BCs, but they must still prioritize:
• Adequate oversight: Ensuring proper supervision of BC operations.
• Effective service provision: Making sure BCs can effectively serve customers in their designated areas.
► Structure: These are small, low-cost physical structures ("brick and mortar") located in rural centers. They serve as a middle ground between the main bank branch and the individual BC locations.
► Support for BCs: Each Ultra Small Branch supports a cluster of about 8-10 BC units within a reasonable distance (3-4 kilometers).
Ultra Small Branches:
• Functions:
• Provide basic banking infrastructure like a Core Banking Solution (CBS) terminal, passbook printer, and a safe for cash.
• Managed by bank officers/employees, ensuring proper oversight and support for BC operations.
• Facilitate efficient cash management, documentation, and customer grievance redressal. • Benefits:
• Enhanced Supervision: Allows closer supervision of BC activities compared to relying solely on the main branch.
• Improved Service Quality: Ensures better service delivery and customer support in rural areas.
• Increased Credibility: The physical presence of an Ultra Small Branch increases the legitimacy of BCs operating in the area, building trust among customers.
• Base Branch: Each BC (or their retail outlet/sub-agent) must be attached to a specific bank branch designated as the "base branch." This branch is responsible for overseeing the BC's activities and ensuring compliance with regulations.
• Distance Limits: Originally, there were distance limits between the BC's place of business and the base branch (30 km in rural/semi-urban/urban areas and 5 km in metropolitan centers). This was to ensure adequate supervision.
• Relaxation of Distance Criteria: Recognizing the need for flexibility and advancements in technology, the RBI has removed the strict distance criteria for domestic scheduled commercial banks.
• Oversight and Service Provision: Banks now have more flexibility in determining the location of BCs, but they must still prioritize:
• Adequate oversight: Ensuring proper supervision of BC operations.
• Effective service provision: Making sure BCs can effectively serve customers in their designated areas.
Ultra Small Branches:
► An Enhancement to the BC Model Purpose: To provide better support and oversight to Business Correspondents (BCs) operating in rural areas.► Structure: These are small, low-cost physical structures ("brick and mortar") located in rural centers. They serve as a middle ground between the main bank branch and the individual BC locations.
► Support for BCs: Each Ultra Small Branch supports a cluster of about 8-10 BC units within a reasonable distance (3-4 kilometers).
Ultra Small Branches:
• Functions:
• Provide basic banking infrastructure like a Core Banking Solution (CBS) terminal, passbook printer, and a safe for cash.
• Managed by bank officers/employees, ensuring proper oversight and support for BC operations.
• Facilitate efficient cash management, documentation, and customer grievance redressal. • Benefits:
• Enhanced Supervision: Allows closer supervision of BC activities compared to relying solely on the main branch.
• Improved Service Quality: Ensures better service delivery and customer support in rural areas.
• Increased Credibility: The physical presence of an Ultra Small Branch increases the legitimacy of BCs operating in the area, building trust among customers.
INITIATIVES OF RESERVE BANK OF INDIA
The Reserve Bank of India in its annual policy statement of April 2005 recognized the problem of financial exclusion and initiated several steps. Some of the major initiatives aimed at promotion of financial inclusion include:► Introduction of basic savings bank deposit account (BSBDA) either with nil or very low balances as well as charges that make such accounts accessible to vast sections of population.
► A simplified general purpose credit card (GCC) facility to be issued by banks without insistence on collateral or purpose.
► Launching Self-help Group scheme.
► Simplified "Know Your Customer (KYC)" norms.
► Relaxations in Branch Licensing Policy.
Microfinance Institutions (MFIs)
► MFIs are organizations that provide financial services to low-income individuals and communities who traditionally lack access to banking services. Think of them as specialized institutions catering to those often excluded from mainstream finance.► Collateral-free:
► This means the loan is given without the borrower having to pledge any assets (like land or jewelry) as security. This makes it easier for poor people to access credit, as they often don't own valuable assets.
► Household income limit:
► The combined annual income of the household (husband, wife, and unmarried children) must be Rs. 3,00,000 or less to qualify for a microfinance loan. This ensures that the loans are targeted towards those who need them most.
