Business Correspondent Model Explained

Financial Inclusion is access to adequate and timely credit and other financial services to poor and unbanked sections of society. With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) have been permitted to use the services of intermediaries in providing financial and banking services through the use of Business Facilitator/ Business Correspondent Model.

However, banks have to ensure the preservation and protection of the security and confidentiality of customer information in the custody or possession of BC.

Business Correspondent Model

Services offered by Business Correspondent

The Services offer by BC may include:

  • Identification of borrowers and fitment of activities
  • Collection and preliminary processing of loan applications including verification of primary information/data
  • Creating awareness about savings and other products and education and advice on managing money and debt counseling
  • Processing and submission of applications to banks
  • Promotion and nurturing Self Help Groups/Joint Liability Groups
  • Post-sanction monitoring
  • Monitoring and handholding of Self Help Groups/Joint Liability Groups/Credit Groups/others; and
  • Follow-up for recovery.
  • Disbursal of small value credit
  • Recovery of principal/collection of interest
  • Collection of small value deposits
  • Sale of micro insurance/ mutual fund products/ pension products/ other third party products
  • Receipt and delivery of small value remittances/ other payment instruments
  • Distribution of banknotes and coins

Entities Eligible to work as Business Correspondent

The banks may engage the following individuals/entities as BC:

  1. Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana/medical / Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own Petrol Pumps, authorized functionaries of well-run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs)
  2. NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies
  3. Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act
  4. Post Offices
  5. Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, other than Non Banking Financial Companies (NBFCs).
  6. Bank can engage non-deposit taking NBFCs (NBFCs-ND) as BCs

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