Read About The Business Correspondent Model For Financial Inclusion

In a country like India where a large portion of the population lives in remote and rural area, it is hard for banks to reach each individual. Even today, banking services are not available in remote areas as banks cannot practically start the branch. For this, they appoint individuals and entities as agents known as Business Correspondents. They serve to provide the basic banking services to such remote areas and considered as a feasible solution to extend the basic business services to over 600000 villagers in India. With this, these BC’s are the right instruments to facilitate financial inclusion in India.


What are BCs and their functions?


Business Correspondents are agents who are engaged in providing basic banking services to the remote locations where no bank branches or ATM is available. They help banks to provide banking services at the lowest cost and this role is definitely instrumental in promoting financial inclusion. These agents perform several functions including disbursal of small value credit, identification of borrowers, collection of small value deposit, recover of principal, a collection of interest, sales of mutual funds and insurance products, pension products, third party products and other payment instruments. These agents also help in creating awareness about saving, different bank products, advice on managing money, debt counselling and other important baking services.


Products provided by BCs


When considering the products provided by the BCs are guided by the RBI that includes: fixed deposit and recurring deposit with low minimum deposits, small saving accounts, micro credit, remittance to any BC customer and general insurance. This model helps banks to provide the banking service at the door-step if the customers. The main emphasis is to provide services like cash in and cash out with being closer to the rural population and address them at the last-mile problem.


Who can be a Business Correspondent Agent?


Who can be a BC agent? This is a common question that you may have in mind. RBI has provided guidance and a long list of persons along with entities who can be a BC agent. At the initial stage, entities are permitted to act as BC should be registered like MFIs/NGOs. Later on, this has been extending to include individual owners of kirana, an ex-serviceman, retired bank employees, retired teachers, medical/fair price shop, retired government employees, agents of small saving schemes of the government of India or insurance companies, individual public call office (PCO), etc.


The list does not ends here, as Business Correspondent Agent can be an individual who own a petrol pump and authorised functionaries of a well-operating self-help group that is linked to banks. Along with this, BC agents can be any individual who is operating common service centres. Since the introduction of the BC model, it was very attracting but was not able to deliver the expected service. This was due to various shortcomings where banks imposed higher restrictions on operations of BCs.


The main reason also includes the very low salaries of Business Correspondent Agent who work at the long distance and used to travel along distance each day. The salary was not sufficient to cover the daily expense and benefit the agents. In addition, JYD also required hard work from the agents to ensure that continuous activities on accounts opened by villagers are performed. All these factors de-motivated agents and the program was not a great success. However, RBI new guidelines and effort from banks have given new life to BC’s and now emerged as the best business correspondent model for financial inclusion in India.


Now this model is definitely improving the financial and banking services in remote areas of India. These agents help people at their door-step and resolve any query.

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