Saturday, 12 November 2011


Financial Inclusion by Extension of Banking Services - Use of Business Correspondents (BCs)

Details on Business Correspondent Model can be accessed at:-


A good explaination on the Financial Inclusion and Business Correspondence is given in the following site:-

A few of the reports on Business Correspondent Model are compiled as under:-

A) "As of today, 75 million ‘no frill' accounts have been opened but there are hardly any transactions in them"
- - - - The Hindu July 10, 2011

B) "Banks have to realize that for the Business Correspondent (BC) model to succeed the BCs, who are the first level of contact for customers, have to be compensated adequately, so that they too see this as a business opportunity"
- - - - - RBI Deputy Governor K C Chakrabarty; Business Standard 29 June 2011;

C) Following are the important RBI findings

1) "Out of 50 public sector and private sector banks, only 26 banks have so far reported appointing BCs, through which 88.60 lakh no-frills accounts have been opened as on March 31, 2009. The number of accounts opened forms only 26.82 per cent of the no-frills accounts reported to be opened by banks so far. Most of the banks that have employed BCs have appointed Section 25 companies/ Trusts/ Societies as BCs."

2) "At present, the BC model is largely perceived as a channel for undertaking only liability side business (deposits). Experiences from the field suggest that in many cases, banks are using the BCs for opening no-frills accounts through which the various government payments like NREGA, pensions and other social security payments are routed. If the BCs are used merely for this purpose, the income generated by the BCs will not be sustainable over a period. For a BC to become viable, the range of services to be delivered through the BC should be ramped up to include suitable small savings, micro credit, micro insurance, small value remittances, etc."

D) "As announced in the Annual Policy Statement for the year 2010-11, a discussion paper on engagement of ''for profit'' companies as BCs was placed on RBI website on August 2, 2010. Taking into consideration the pros and cons and based on the feedback received from various quarters, it has been decided to permit banks to engage companies registered under the Indian Companies Act, 1956, excluding Non Banking Financial Companies (NBFCs), as BCs in addition to the individuals/entities permitted earlier, subject to compliance with the guidelines."
- - - - - RBI Notification No: RBI/2010-11/217 (28-Sep-10) Financial Inclusion by Extension of Banking Services Use of Business Correspondents (BCs); SEP 29 2010;

E) "To reach out to the people in the unbanked rural areas, the State Bank of India (SBI), the largest public sector bank, plans to cover all the Gram Panchayats (Gps) of Orissa under ‘Business Correspondence Model’. This is being done in line with the Reserve Bank of India (RBI) guidelines on financial inclusion."
- - - - - - Business Standard; 18 JUL 2011;

F) "Mobile-enabled business correspondents, who are authorized to conduct business on behalf of banks, can service a customer for less than 50 paise far below than Rs 40-60 at a branch"
- - - - - BCG India Partner and Director, Neeraj Aggarwal;13 JUL 2011;;

G) "Microfinance companies may be looking at all potential business opportunities to tide over the crisis in the sector. They are now exploring the possibility of acting as business correspondents for banks to achieve financial inclusion”
- - - - reports Gopika Gopakumar of CNBC-TV18; 4 JUL 2011;

H) "To achieve full financial inclusion, institutions in the private, public, and social sectors must develop innovative assets, such as cows or chickens, as a store of value. Nearly 60 percent of the people we surveyed in the Philippines keep some form of savings. These savings are typically used for managing cash flow rather than for long-term asset accumulation. The annual turnover can be many times the average balance. In India, about 20 percent of the unbanked population has access to credit, but 60 percent of the borrowing is done through moneylenders."
- - - - reports Mckinsey (

I) "The World Bank’s Consultative Group to Assist the Poor (CGAP) estimates that the average monthly cost to customers of using correspondent and mobile-phone-based models is 19 percent lower than the cost of these services in traditional branches—and the cost is up to 50 percent lower for some products, such as medium-term savings and bill payment"
- - - - reports Mckinsey (

(Web-Sites mentioned above as accessed on 26 OCT 2011)


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