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Business Correspondent

Lack of access to basic financial services is still a major challenge in a country such as India where more than 65% of the population is classified as “Under Banked or Unbanked”. Recognizing this problem, the “Reserve Bank of India (RBI)” introduced a regulation in 2006 allowing banks to provide service at people’s doorstep through the use of third party services. This model is referred to as “Business Correspondents/Banking correspondents” in short BC’s.

BC is a representative authorized to offer services such as cash transactions where the lender does not have a branch. Primary role of BC is to oversee the proper development and functioning of indirect banking channels. These business correspondents are subject to RBI regulations and would have direct contact with one or more financial institutions. These BC’s charge a commission from the bank for enrollment of clients, transactions, deposits etc.

Off late RBI has eased the norms like interoperability of business correspondents, aimed at helping customers in rural areas access banking services such as cash deposits, withdrawals, remittances and balance enquiries from anywhere in the country on the lines of ATM facilities available to customers in urban areas. Benefits to customers include instant access to banking services at doorsteps; relaxed KYC norms for small accounts allow better possibility of opening bank accounts; lower costs and time required to access banking services.

Micro ATM & Aadhaar Enabled Payment System (AEPS) – Use of technology along with banking correspondents can help bank tap large unbanked sector effectively as Banks can use mobile and micro ATM’s along with banking correspondent to deliver low cost banking solutions to unbanked customers. The Unique Identification Authority of India (UIDAI) would enable beneficiaries with Aadhaar to withdraw money near their doors through the core banking system, vide AEPS. “The beneficiary has to put his finger and Aadhaar number in to the micro ATM wireless device and get the money within 8 to 9 seconds from a business correspondent after verification about the beneficiary having that much amount deposited in the bank account shown through a receipt by the device.