Banks can now engage any individual, including those operating common service centres, to work as business correspondents (BCs). BCs conduct banking business as agents of banks at places other than the bank premises.
The Reserve Bank of India (RBI) has allowed banks to engage any individual to act as BCs to provide more flexibility to banks. The central bank will issue operational guidelines separately.
In addition, RBI is preparing a discussion paper on allowing for profit companies other than non-banking finance companies as BCs of banks. “…suggestion has been received from various quarters to consider ‘for profit’ companies (other than NBFCs) as BCs of banks,” said RBI.
The business correspondents are paid commission, fees as per RBI guidelines while banks follow know-your customer norms while undertaking banking activities through them. Banks enter into specific arrangements with BCs by fixing limits on cash holding and limits on individual customer payments and receipts.
At the same time, the transactions carried through BCs are accounted for and reflected in the bank's book of accounts by the end of the day or the next working day.
With the objective of ensuring greater financial inclusion and increasing outreach of the banking sector, RBI had earlier allowed banks to engage NGOs, micro finance agencies and other self-help groups for identification of borrowers, processing of loan applications, helping recovery and such other support services. In 2006 the central bank had allowed banks to use intermediaries as BCs for providing financial and banking services.
