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Banks have deployed as many as 1.95 lakh business correspondents (BCs) covering 2.21 lakh villages across the country as of March 31, 2013, a top RBI official said today.
"The BC model allows banks to do cash in-cash out transactions at a location much closer to the rural population, thus addressing the last mile problem.
"As on March 31 2013, banks have reported deploying 1,95,380 BCs which covered 2,21,341 villages," Reserve Bank Executive Director Deepali Pant Joshi said recently in a seminar.
"Today we are painfully aware that there are a vast number of unreached people excluded from formal financial services. Potential entrepreneurs, small enterprises fail to grow and prosper due to capital constraints. Financial deepening is thus necessary for economic growth," she said.
BC model of financial inclusion allows banks to utilise non-governmental (eg NGOs), micro-finance institutions and others as intermediaries in providing financial and banking services through the use of business facilitator and business correspondent.
"Let us be clear as to the enormity of the challenge, half of the country is unbanked...The development of the habit of banking would lead to an increase in savings and investment, improve the efficiency of allocation of capital and increase the ability of monetary authorities to stabilise the economy in times of crisis," she said.
Joshi said a well-functioning financial system creates necessary conditions for more rapid economic growth so that there is a positive correlation between economic growth and the financial system.
The RBI has also relaxed regulatory dispensation on KYC norms to open a bank account, specially for small accounts, she said.
Besides, banks have been mandated to open at least 25% of the total number of branches during a year in unbanked rural centres.
Joshi said new banks are expected to bring sustainable business models, bring innovation in banking products and services and improve penetration of banking activities.
"We need new banks to bring new business models and not for derivative products and investment banking. At mezzanine finance level, Banks also need sensitivity to default rates," she said.
