Financial sector companies like Shriram Finance, Srei and Mahindra Finance foraying into distant rural areas will now get the opportunity to offer para-banking services in those zones. The Reserve Bank of India on Tuesday relaxed the rules for non-banking financial services companies that do not collect public deposits to be appointed as Business Correspondents (BCs) by banks.
The central bank has stipulated that there should not be any co-mingling of bank funds and those of the NBFC-ND (non-deposit taking) appointed as BC.
“There should be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of,” the RBI said in a notification.
Shailesh Pathak, president, Srei Infrastructure, said the move leverages on the wide reach of these NBFCs to deepen financial inclusion. It is a good opportunity for these companies to tap deeper unbanked areas, he said.
In a notification issued on Tuesday, the RBI said banks should ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own customers and forced bundling of services offered by the NBFC-ND does not take place, it said.
With a view to providing operational flexibility to banks and in view of the technological developments in the banking sector, the RBI has also decided to remove the stipulation regarding distance criteria of BC’s agents and outlets.
Earlier, every retail outlet/sub-agent of BC was required to be attached to and be under the oversight of a specific bank branch designated as the base branch and the distance between the place of business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centres.
The services of BCs, which act as bank representatives, include identification of borrowers and fitment of activities, collection and preliminary processing of loan applications including verification of primary information/data, processing and submission of applications to banks, 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 and receipt and delivery of small value remittances/ other payment instruments.