Banks get leeway on NGOs, micro-finance bodies

The Reserve Bank of India (RBI) today formally granted non-governmental organisations (NGOs) and micro-finance institutions (MFIs) engaged by banks as financial and banking intermediaries.

The decision enables banks to deploy services of NGOs, self-help groups, MFIs and other civil society organisations (CSOs) as intermediaries in providing financial and banking services.

In a circular to banks, RBI has stressed the need for adopting business facilitator and correspondent models to ensure greater financial inclusion and expansion of the banks' outreach and asked banks banks to formulate specific schemes for using NGOs and MFIs as business correspondents.

The "business facilitator" model typically includes farmers' clubs, cooperatives, community-based organisations, IT-enabled rural outlets of corporate entities, post offices, insurance agents and panchayats.

These entities could help banks in identifying borrowers, preliminary processing of loan applications, creating awareness, post-sanction monitoring and follow-up for recovery.