What is the Role of a Business Correspondent (BC)?
The rural population of India is still facing the shortage of vital banking services. According to the Global Findex Survey of 2012, around 650 million people are still classified as “Underbanked”. To deal with this problem, RBI (Reserve Bank of India) created a regulation in 2006. It allows banks to use third-party and non-banking agents to help people.
This third-party agent is known as Business Correspondent (BC). BC provides essential banking facilities to the financially or digitally weaker members of society. It helps those rural people who are illiterate and less aware.
To know more about BC, read this blog.
A Brief Insight to Business Correspondent (BC)
Business Correspondents (BCs) are persons or bodies like NGOs that act as volunteers of banks. They provide all kinds of banking services in rural as well as urban areas.
BCs carry devices with them so that they can take thumb impressions, digital signatures, etc., from villagers. These devices include mobile phones, micro ATMs, receipt generators, etc.
A BC is responsible to collect small deposits, disbursing loans, and other banking services. It helps banks to facilitate banking services at a very low cost.
The Function of Business Correspondent
They have to do a lot of jobs. Their works include
- Identifty borrowers
- Gathering small-value deposits
- Disbursal of small-value credit
- Collection of interest/ Recovery of principal
- Raising awareness about products and saving
How to become a Business Correspondent?
What is a Business Correspondent Model?
The Business Correspondent model works on the basis of the Commission model. Banks give them a good hike for the work they do.
For example, a BC will be paid to open a bank account, and transfer money or new loans disbursed.
The rate of the commission is being reviewed periodically. BC is allowed to charge any fee from their customers. But banks are entitled to impose affordable service charges from their customers in a transparent manner.
As per the instruction of RBI, the structure of the commission is planned in a way that a small rise in the number of customers/ transactions can’t affect the commission.
The commission is fixed. On the other hand, the variable parts depend on other things such as certain indications or customer satisfaction index. In case of a lack of services, some percent of the fixed commission could be put off or taken back.
Advantage of the Business Correspondent Model
A BC model helps banks to reach the weaker section of society. The conventional bank can’t reach the weaker section independently. BC can provide a wider range of banking services than traditional banks. For example, small loans, money transfers, and bill payments are all provided by the BC.
With the help of BC, financial inclusion can be increased. It provides services to those people who can’t access traditional banks because of poor digital knowledge, lack of awareness, and trust issues.
Communication is a very important tool if you are in the business of mediator. A person with skills in writing and communication can become a BC. A person who is interested in business can do this work more easily.
To work as a BC, you need to have a bachelor’s degree in journalism, business, or a related field. Those who have a sense of the financial industry or have worked as business journalists can become BC.
Those who are willing to become a BC should start writing and reading business news. If you have worked as a business journalist, it will boost your CV. Once you get all the essential skills, you can apply for the job.
A BC is an individual or a body that provides banking services. The eligibility criteria for a BC as per the guidelines of the RBI are mentioned below.
- Ex-servicemen, retired bank employees, post office workers, and retired teachers are allowed to join BC.
- Individuals from kirana, medical shops, and fair-price shops can become BC.
- Those NGOs/ MFIs set up under Societies/ Trust Acts can become BC.
- Those societies registered under Co-operative Societies Acts of State can become BC. The registered societies as per the Mutually Aided Co-operative Societies Acts.
- Small Savings Schemes’ agent of the Indian government. Insurance Companies and individuals who own petrol pumps.
- Section 25 companies that are independent organisations or in which banks, NBFCs, telecom companies, and other corporate bodies or their holding companies don’t have a fair holding in excess of 10 per cent.
- Bank can engage any individual as BC including CSC operators.
- A well-run Self Help Groups (SHGs)’s officials linked to banks Non-deposit taking NBFCs (non-banking finance companies) can become BC.
Role and Responsibilities of Business Correspondents
1. Bringing New Customers
The main duty of BC is to guide customers so that they take small loans. BC counsel, educate, and advise target customers about the management of money.
2. Delivering Products and Services
BC checks the enrollment of customers in different financial products. It manages the initial process of various deposit forms that include verification of the primary data.
3. Payment and Collection
The other duty of BC is the collection of money and payment. For example, small-value deposits and cash withdrawals (maximum value- ₹20,000/- per account per day) are handled by BC. There is no certain limit in the case of a minimum value.
Scope of Activities to be Undertaken by Business Correspondents
- BC identifies potential customers.
- KYC will be completed by the BC.
- BC accomplishes the process of filling out applications, opening accounts, and submitting them to the bank.
- It opens the no-frill deposit accounts
- It collects and pays small value deposits and withdrawals: Min: NIL, Max: ₹2000/- per transaction.
- According to the FI Plan of IDBI Bank, it covers small-value remittances.
- The BC and his agent have the authority to accept/ deliver cash at his place of work or at any convenient location to the ceilings per customer (₹2000/- in each case).
- It can authorise any other bank services on behalf of the bank with the appropriate authority.
- To fix up statements of mini account and other information of account for 3 months.
- It can cross-sell financial products when they are assigned to do so. These products include pension products, mutual fund products, and other third-party products.
- BCs should take care of reputational risks in case the sub-agents of CSCs are involved.
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Thus, we can say that BC helps the bank to provide all the services to the underserved population. In this way, it helps to increase financial involvement. It also provides a job opportunity to those who have a keen sense of finance along with great communication skills.