It emphasised that the BC model presented banks with a workable option to provide banking services to hitherto inaccessible areas in a cost-effective manner, while in the traditional route penetration of remote areas of India could work only to a limited extent.
Simply put, the BC model is all about a certain set of people or entities allowed by RBI to conduct banking business as agents of the banks at places other than the bank premises.
Further, the Working Group – whose report to review the business correspondent model has been put on RBI website on Wednesday afternoon – has noted that BCs should be used for the full range of financial activities and not confine to opening and servicing no-frills accounts only. It also opined that with the Central and State Governments planning to route various government payments through the banking system, the BCs could be the ideal medium for the banks to handle the huge volumes of low value transactions. As experience showed, the BC model coupled with ICT (information, communication & technology) solutions could help banks substantially increase their outreach facilitating financial inclusion.
Furthermore, it pointed out that the objective of having a banking outlet at every village with a population of over 2000 at least once a week on a regular basis by March 2011could be achieved by substantially scaling up the BC model.
The other major recommendations of the Working Group include measures for improving the long term viability of the BC Model by permitting banks to collect reasonable service charges from the customer in a transparent manner for delivering the services through the BC and handholding of BCs by banks in the initial stages.
Earlier Reserve Bank in January 2006, permitted banks to use intermediaries as Business Facilitators (BFs) or Business Correspondents (BCs) for providing financial and banking services with the objective of ensuring greater financial inclusion and increasing outreach of the banking sector.
As per the current RBI guidelines, NGOs or mutual fund institutions or companies post offices and retired bank employees, ex-servicemen and retired government employees can act as BCs of banks.
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