RBI allows companies to act as BCs,bars NBFCs

ICICI Bank managing director and chief executive Chanda Kochhar welcomed the Reserve Bank’s move to allow corporates having rural experience to act as BCs for achieving the goal of financial inclusion. “The move to allow for-profit companies with a widespread retail network to act as business correspondents is a path-breaking and welcome development,” Kochhar said in a statement.

The corporate sector has been lobbying for the inclusion of NBFCs to act as BCs. Earlier,in response to the RBI’s discussion paper on “’Engagement of ‘for-profit’ companies as business correspondents”,the Confederation of Indian Industry had suggested that “if the NBFCs were allowed to be BC for banks,their value proposition to the customers will be more powerful”. NBFCs can supplement the bank’s deposit services (that they offer as an agent) with their own credit and distribution products,it had said.

Unveiling the final guidelines for BCs,the RBI said banks may formulate a policy for engaging BCs with the approval of their board of directors. “Due diligence may be carried out on the individuals/ entities to be engaged as BCs prior to their engagement. The due diligence exercise may cover aspects such as reputation/ market standing,financial soundness,management and corporate governance,cash handling ability and ability to implement technology solutions in rendering financial services,” the RBI said.

Kochhar said banks will be able to partner with players having rural reach to scale-up their efforts to provide access to financial services to the unbanked population. While a BC can be a BC for more than one bank,at the point of customer interface,a retail outlet or a sub-agent of a BC should represent and provide banking services of only one bank.