Why do banks need business correspondents (BCs)? RBI issued guidelines in January,2006 asking banks to engage business correspondents (BCs). BCs are retail agents who provide banking services at locations other than a bank branch Their functioning is to enable a bank to expand its outreach and offer a limited range of banking services at low costs,since setting up a brick and mortar branch is not viable in all cases. Who can act as BCs for banks? Banks can engage companies registered under the Indian Companies Act,1956 with large and widespread retail outlets,excluding non-banking financial companies. RBI allows companies with an extensive retail or dealer network across the country to be appointed as BCs. Retired bank employees/teachers/government employees and ex-servicemen,individual owners of kirana,medical or fair price shops,individual public call office operators,agents of small savings schemes of the government and insurance companies can also act as bank agents. Individuals who own petrol pumps,authorised functionaries of well-run self-help groups that are linked to banks also qualify. Banks can also tie up with post-offices,NGOs or microfinance institutions (MFIs) to offer financial services. Banks will have to draft a policy for engaging BCs and choose them based on their reputation,financial soundness,cash-handling ability and ability to implement technology solutions in rendering financial services. What will BCs do? BCs are permitted to collect and carry out preliminary processing of loan applications. They can also create awareness about savings,provide debt counselling,promote,nurture and monitor self-help groups/joint liability groups,perform post-sanction monitoring and follow up the recovery of dues. As agents of banks,BCs can collect small value deposits,disburse small-value loans,engage in the recovery of principal/collection of interest,sale of microinsurance/mutual fund products/pension products/other third-party products. How will banks monitor BCs? To ensure adequate supervision,every retail outlet or sub-agent will be attached to and monitored by a specific bank branch (the base branch). The distance between the two should not exceed 30 km in rural,semi-urban and urban areas and 5 km in metropolitan centres. In case there is a need to relax the distance criterion,the District Consultative Committee/State level-Bankers Committee could consider and approve relaxation in under-banked areas. Can a single BC represent multiple banks? A BC can act as an agent for more than one bank. However,at the point of customer interface,a retail outlet or a sub-agent of a BC can represent and provide banking services of only one bank. Banks would be fully responsible for the actions of BCs and their retail outlets. BCs acting as agents for more than one bank would have to ensure that there is no commingling of customer databases and account details. How do customers identify a bank BC? The retail outlet/sub-agent of a bank must post a signage indicating their status as service providers for the bank and provide the name of the BC,the telephone number of the base branch and the Banking Ombudsman,and the fees for all services available at the outlet. Additionally,bank officials would have to personally introduce the BC to the public in the presence of village elders and government functionaries so that there is no misrepresentation. Banks will also use print and electronic media to give wide publicity about the BC model. How will banks decide on the fee structure? To ensure that the commission structure drafted for BCs is not driven merely by an increase in the number of clients served or the transaction volume,banks will have fixed and variable (a measure for which could be customer satisfaction) components for remuneration. Banks will also have the freedom to defer some part of the variable remuneration in case of deficiency of service. The banks (not BCs) are permitted to collect reasonable service charges from the customers in a transparent manner. How would BCs process transactions? BCs would have to process transactions real time with the help of a hand-held device or mobile phone,seamlessly integrated to the core banking solution of the bank. The transactions should be accounted for on a real-time basis and the customers should receive immediate verification of their transactions. Will customers have to pay fees to BCs for their services? No. RBI has prohibited BCs from charging any fee to the customers directly. How will banks ensure that customer data is not misused? The banks will put checks in place to ensure the protection of the confidentiality of customer information in the possession of BCs. How do banks protect customers from possible frauds? Banks set limits on cash holding by intermediaries as well as limits on individual customer payments and receipts. The agents would have to issue a receipt on behalf of the bank for any cash collected from the customers. All offline transactions have to be accounted for and reflected in the books of the bank by the end of the day. The agreements with the customer will clearly specify that the bank would be responsible to the customer for the actions of the BC. The financial services offered by the agents of the BCs cannot be tied to the sale of any product of the company. To ensure the continuity of services,banks will put in place a business continuity plan,in case the agency arrangement with the companies or sub-agents is terminated. Is there a mechanism for customer grievances redressal? The name and contact number of designated grievance redressal officers of the bank will be widely publicised. If a complainant does not get a satisfactory response from the bank within 60 days from the date of lodging the complaint,he can approach the office of the Banking Ombudsman.
