BUSINESS CORRESPONDENT & FACILITATOR

OBJECTIVES

On studying this unit, the readers will know

What is a Business Facilitator Model?
What is a Business Correspondent Model?
BF versus BC and the services each of them offer
The role of BF and BC in extending microfinance and finance to other priority and
neglected sections of the rural as well as urban society
Scope of the activities of BF/BC in achieving financial inclusion
Role and Responsibilities of BCs and BFs
INTRODUCTION
We have seen in the previous unit that the customer-reach of the banks is still far from
satisfactory. For every 16000 people in India, there is only one branch of a commercial bank
to meet their banking needs. As of 206, there still remained about 400 under banked districts
in the country, of which, the majority were in Uttar Pradesh (63), followed by Madhya
Pradesh (41) and Bihar (36). While the Metro centres could boast of more than 500 branches
each centre, many villages had to do with only one branch among them. While banks have
added 1065 branches in 2005-06, the number of rural and semi-urban branches has in fact
come down by 916 and 285 respectively, this is the position despite a massive expansion of
branch net-work undertaken by the banks in the period that followed nationalization. Though
IT has mode remarkable improvements in the banking systems and mode innovative delivery
channels possible, rural areas do not, as yet, have the benefit of IT driven banking in full. All
this have led the policy-makers to think of an alternative source that may enable banks to
outreach those sections of the society, especially the rural people, who would otherwise
continue to be neglected. The Business Facilitator and Correspondent Model, an out come of
the process and an attempt to use the local organizations/systems to intermediate with the
banks and customer is an ideal route for banks to take banking services to the
underprivileged hitherto remained untouched by them and to cover the villages still
remaining unbanked. The model so evolved with the objective of ensuring greater and
sustainable financial inclusion and increasing the outreach of the banking sector is known as
Branchless Banking Model.

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NEED FOR THE BF/BC MODEL

It is estimated that only 27% of the Indian farmhouse holds have access to institutional credit
as on today. Another 22 percent access the money lenders. The remaining 51 percent do not
get any access to institutional credit, leaving them to fend for themselves for their funding
needs to carry on agricultural and other activities. There is therefore an urgent need for their
greater financial inclusion. Recently, the Union Finance Minister has exhorted that each bank
branch may open at least 250 new accounts each year to remedy this situation. This will see
opening of 12.5 million new accounts by banks each year.
There is, therefore, a vast untapped market in the rural areas for taking banking and financial
services to people living there and those who are so far untouched by the formal banking
system. The task is daunting enough that the banks cannot handle it single handedly as
shown by their past performance. Nor could the current tempo of branch expansion by banks
indicate that the task is anywhere achievable in the near future. This led the policy makers to
believe that unless a vast army of business facilitators/correspondents with appropriate
technology is deployed for the purpose, there can be no remedy for the issue. These
agents/agencies may not be regular employees of banks but work on an outsourcing basis for
taking the banking services to the hitherto unbanked centres. These banking services include
rural credit disbursement, delivery of savings and insurance products, small value payments
and remittances.

The BC idea has come from Brazil where retail vendors, lottery outlets and post offices
double as bank branches. An estimated $ one billion in transactions were processed with
point-of-sale (POS) devices such as biometric or smart card readers through Brazils 90,000
agents in 2005 and a total of about 12 million accounts were opened across the network in
only three years.

ROLE AND RESPONSIBILITIES OF BUSINESS FACILITATORS/BUSINESS

CORRESPONDENTS
It is said that the Business Facilitator/Business Correspondent will be a friend, philosopher
and guide to the people in the villages served by him/her. A Business Facilitator/Business
Correspondent is normally the one residing and/or located in the area he/she serves. He/she
may have the agriculture background and work with dedication to the cause of upliftment of
the rural poor. He/she may educate the villagers in general and the farmers in particular about
various aspects of banking and finance with reference to rural development and possibly

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improved agricultural practices for cost-cutting and improving the yield of crops and the
income of the people in the area.
Role of a Business Facilitator/Business Correspondent
(1)He/she is an intermediary between the Bank and the villagers.
(2)He/she is an intermediary and confidant of the bank. He/she gathers information on
the prospective borrowers,
Name
Address
Family size
Family details
Details of the economic and income earning activity pursued by the members of the
household
Land Holding including its size and pattern and its whereabouts
Crops cultivated and the cropping pattern followed
Cash Flow Pattern
Annual Net Income of the household
Spending Pattern of the household
The information so gathered is used for drawing the Borrowers Profile which in turn helps
the bank to take appropriate credit decisions.
(3)He/she is an information assimilator. Using the information he/she has gathered, it is
possible to prepare a Cash-Flow Statement and prepare the farmers Cash Budget.
(4)This follows customer counseling o the financial needs and how can it be met and
customer education on the products and services available from the bank.
(5)He/she should give to the farmers and others complete, factual and truthful
information on the bank on various products and other aspects.
(6)He/she should not overlook or hide any vital and material information to the
customer.

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(7)He/she should protect and respect the privacy of the customer.

(8)He/she should not compromise his/her personal interest to that of the Bank.
(9)He/she should treat all customers alike and with no disparity and with respect and
dignity. He/she should not differentiate the customers one against the other and should
not harbor any caste or communal feelings.
Apart from the above roles a Business Facilitator/Business Correspondent is expected to
perform, they can be entrusted with the following specific activities/duties:
(1)Identification of prospective borrowers.
(2)Determining suitability of the activities chosen by them and advising the branch
thereof.
(3)Education the prospective borrowers on the loan products available with the bank
and advising them of the one that suits them.
(4)Helping the prospective borrower in filling the loan application
(5)Collection of the application forms from the applicants and initial scrutiny thereof.
(6)Verification of primary information given therein.
(7)Ensuring that the KYC norms have been complied with.
(8)Processing of loan applications with the help of the Banks template applicable to
the product category and submission of the proposals to the branch.
(9)Post-sanction and pre and post disbursal verification and monitoring.
(10) Follow-up for recovery
(11) Giving inputs to farmers and villagers on skill development and micro
enterprises.
(12) Formation /Bank Linkage of SHGs
(13) Establishment of Farmers Clubs.
WHO CAN BE THE BUSINESS FACILITATORS?
The following organizations and their members/staff can be business facilitators.
(1)Non-Government Organisations (NGOs)

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(2)Farmers Clubs
(3)Community Based Organisations (CBOs)
(4)Co-operative Societies
(5)Post offices
(6)Insurance Agents
(7)Village Knowledge Centres (VKCs)
(8)Agri-Clinics and Agri Business Centres
(9)Krishi Vigyan Kendras
(10)

KVIC/KVIP units in the area.

(11)

IT enabled Rural outlets of Corporate Entities

(12)

Farmers service Societies

(13)

Well functioning Panchayats.

Apart from the above organizations and institutions, individuals may also function as
Business Facilitators. An illustrative list of such individuals is given below:
Primary and Secondary School Teachers
Members of NGOs/LBOs
Members of Self Help Groups
Anganwadi/Balwadi workers
Primary Health Centre Staff
Postal Staff such as Post Masters/Village Post Masters, Postmen, Postal clerks
Municipal and Gram Panchayat staff
Village Officer and his staff
Members of Farmers Service Societies
Ration Dealers

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 Shop Keepers and Kirana Merchants

Members of any other Business Organisations and institutions functioning in the area
WHO CAN BE BUSINESS CORRESPONDENTS?
Unlike business facilitators, business correspondents can also handle some cash transactions
on behalf of the bank and clients. Hence, the following can function as Business
Correspondent.
(1)Non-Government Organisations (NGOs)
(2)MFIs set up under Societies/Trust Acts.
(3)Societies registered under Mutually Aided Co-operative Societies Act or the Cooperative Societies Acts of states.
(4)Companies registered under section 25 of the Companies Act, 1556.
(5)Registered NBFCs not accepting public deposits.
(6)Post Offices
(7)Insurance Agents
(8)Krishi Vigyan Kendras
(9)KVC/KVIB units
(10)Registered Village Organizations.
Apart from the above organizations and institutions, individuals may also function as
business correspondents, in the light of the announcement by the Union Finance Minister in
his Budget Speech 2008-09. An illustrative list of such individuals is given below:
Retired Bank employees
Ex-servicemen
Retired Government employees.
BUSINESS FACILITATORS: SCOPE OF ACTIVITIES
(1)Identification of borrowers and fitment of activities
(2)Collection and preliminary processing of loan applications

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(3)Preliminary verification of primary information/data

(4)Creating awareness among people in the villages about savings and debt products
(5)Educating people and advising them on managing money
(6)Credit (also debt) Counselling
(7)Submission of loan applications to banks branch
(8)Post-sanction monitoring
(9)Follow-up for recovery
BUSINESS CORRESPONDENTS: SCOPE OF ACTIVITIES
In addition to services identified for facilitation by business facilitators, the activities
undertaken by the business correspondents would be such as may fall within the normal
course of the banking business, but conducted on places other than the banks premises.
These include:

(1)Disbursal of small value credit

(2)Mobilization of small value deposits
(3)Recovery of principal and collection of interest on item above.
(4)Sale of micro insurance, mutual fund products etc.,
(5)Receipt and delivery of small value remittances and other payment instruments.
Such third party intermediaries doing banking business in villages away from the Banks
location attract significant reputation, legal and operational risks for banks engaging them to
work as Business Correspondents. To mitigate these risks, banks generally:
(1)Specify suitable limits on cash holding by Business Correspondents
(2)Specify limits on individual payments and receipts
(3)Ensure that the transactions performed by them are accounted for and reflected in the
banks books at the end of the day or at least the following working day, and

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(4)Ensure that all agreements/contracts with the customer shall clearly specify that the
bank is responsible for the acts of commission and omission of the Business
Correspondent.

BUSINESS FACILITATOR V/S BUSINESS CORRESPNDENT

As seen above, a business facilitator is one who provides lead management facilitation
services on banking and finance related matters to those people residing in villages/centre
where there is no banks branch. In contrast, the scope of activities performed by the business
correspondents will include, in addition to the facilitation services listed above, such
activities performed within the normal course of the banking business also, but conducted at
places other than the bank premises. Here lies the major point of difference between the
Business Facilitators and Business Correspondents. The dividing line between the Business
Facilitator and Business Correspondent is that the latter is allowed to handle small-value cash
transactions in centres where there is no banks branch, which in the normal course may have
to be performed in the branch premises only.

COMPLIANCE WITH KNOW YOUR CUSTOMER (KYC) NORMS

Compliance with KYC norms will continue to be in force for customer identification and
customer relationship for banks and is the sole responsibility of banks. Since the objective is
to extend savings and loan facilities to the underprivileged in the unbanked centres, banks
may however adopt a flexible approach in this regard. In addition to introduction from any
person on whom KYC has been done, banks may also rely on certificated of identification
issued by the Block Development Officers, Heads of Village Panchayats, Post Masters of the
Post Office concerned, or such other public functionary known to the bank.

AWARENESS
OF
BUSINESS
FACILATATORS /BUSINESS
CORRESPONDENTS ABOUT VARIOUS BANKING OPERATIONS
The BF/BC should be generally aware about:
Deposits
Opening of accounts, receipt and payments of amounts in the following deposit accounts:
Savings accounts including No-frills accounts
Term deposits

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 Deposit Reinvestment Certificates

Monthly Income Deposits
Recurring Deposit Accounts
Add-on features of deposit accounts
Insurance-linked deposits
Pre-mature closure/extension of deposits
Calculation of interest on deposits and payments thereof
Simple Interest
Compound Interest
KYC Norms for opening of deposit accounts
Kisan ATMs
(FAQs on various aspects of Rate of Interest and methods of interest calculation including
EMIs are furnished in Appendix I)
Loans and Advances
Similarly, the BF/BC should also be aware of the loans and advances and the product
differentiation in respect of various products.
(1)Advances to agriculture (Tenure-wise Classification)
(2)Short Term Advances to Agriculture
(a)For cultivation of crops
(i)Scale of Finance
(ii)Disbursements in stages
(iii) Marketing of produce
(iv)Recovery of loan

(b)Kisan Credit Cards

(c)Cash Credit system for Agricultural lending
(d)Financing of sugarcane growers under tie-up arrangement with
sugar Factories

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(e)Loan against hypothecation/pledge of agricultural produce

(including warehouse receipts)

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(3)Medium Term Loans for Agriculture (a)For Minor Irrigation

(i) For digging/deepening of wells
(ii) For sprinkler/drip irrigation system
(b)For Land Reclamation
(c) For land Development
(i) For Land leveling
(ii) For Bunding etc.,
(d)For purchase of Farm Machinery and Equipments
(i) For purchase of Harvest Combines
(ii) For purchase of Tractors and Power Tillers
(iii)
For purchase of other equipments
(e)Bio-Gobar Gas Plants
(f) For other Allied Activities
(g)Dairy Farming
(h)Poultry Keeping
(i) For Piggeries
(j) For Sericulture
(k)for Bee Keeping
(4)Long Term loans for construction/setting-up of
Warehousing and godown facilities
Cold Storage facilities
Agri-clinics/Agri-business Centres
Agro-service Centres
Farmers Service Societies
(5)Long /Medium Term Loans for cultivation of Fruit Crops

(6)Floriculture Ventures and Cultivation of Mechanical herbs

(7)Consumption Loans (including to Urban Poor) and
(8)Gold loans

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PROFILE OF A BUSINESS FACILITATOR / BUSINESS CORRESPONDENT AND

NORMS FOR APPOINTMENT

Banks may obtain an application form from the prospective business

facilitator/business correspondent. The bank may also obtain legal opinion in case
the applicant is a Society registered under the Socielities Act, an NGO, or any
other constituted body.
The details furnished in the application form may be thoroughly checked and
satisfied for their authenticity.
Due-diligence check may also be conducted to evaluate the capability and
creditworthiness of the applicant.
As far as possible, NGOs or reputed Village Officers should be encouraged to
work as Business Correspondents.
While evaluating the suitability of the applicant , the following points may be
considered:
Past experience vis--vis ability to implement the outsourced activity to the
satisfaction of the bank.
If the BC/BF has the required financial soundness and ability to fulfill commitment
even under adverse conditions.
Business reputation and culture.
Satisfy that there are no complaints, litigations, potential litigations etc. against the
applicant.
The efficacy of security, internal control etc. of the business facilitator on outsourced
activities. To enable the business facilitators to keep secrecy of data/information, the
internal systems should be robust. Business continuity to be ensured even in case of
employees leaving the agencies.
Knowledge and acquaintance of the area and work
The systems of the service provider should be compatible with the bank and the
standards of performance, area of customer service should be acceptable to the bank.
The service provider with an independent internal audit function in place may be
preferred.
Banks may do a due diligence and have insurance coverage to mitigate operational
risk, if any. An independent review and market feedback about the service provider
may be obtained.

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ELIGIBILITY CRITERIA FRO ENGAGING BUSINESS FACILITATORS

Business facilitators may also be individuals. The following eligibility criteria may
broadly be adopted for engaging the Business Facilitators:
(a)Individuals:
Permanent resident of the village/area of operation and/or continuously staying
in the area of operation for the past three years.
Minimum education level SSC passed.
Aged between 21 and 50 years. In deserving cases like teachers, ex-bank
employees etc., the age criterion may be flexible
Should not be a defaulter to any bank
Should not be engaged by more than one bank as Business Facilitator.
No criminal proceeding against him/her on any court of law.
(b)Institutions
May be a voluntary organization or a registered organization.
If registered, should have authority to work as Business Facilitator. This
should be as per the objective Clause in case of NBFC companies.
The credentials of the promoters and the office bearers of the organizations
should be checked.
The institution or its office-bearers should not be defaulters to any bank.
Should not be attached as Business Facilitator in more than one Bank and
should give an undertaking not to join any other organization during the
period they work for the Bank
In case of registered organizations, the latest audit report/balance sheet may
also be checked.
ELIGIBILITY CRITERIA FOR ENGAGING BUSINESS CORRESPONDENTS
Business correspondents should generally be institutions. The following eligibility criteria
may broadly be adopted for engaging the Business Correspondents:
Should be registered organizations, such as (i) NGOs/MFIs set up under
Societies/Trust Act, (ii) Societies registered under Mutually Aided Co-operative
Societies Act or the Co-operative Societies Acts of States (iii) Companies
incorporated under section 25 of the Companies Act, 1956 (iv)Registered NBFCs not
accepting public deposits (v) Post Offices and (vi) Registered Village Organizations.
They should have authority to work as business correspondent in the Objective
Clause.
The credentials of the office bearers should be verified.

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 The institution and/or its office-bearers should not be the defaulters to any
bank/financial institution.
In case of registered institutions, the latest audit report/balance sheet may also be
checked.
The committee on financial inclusion headed by Dr.C.Rangarajan, Chairman of the
Economic Advisory Council to the Prime Minister has, however, recommended the
individuals could also be appointed as banking Correspondents. Consequent to this, the
Finance Minister said that individuals like retired bank/Government employees and exservicemen can be appointed as business correspondents, in addition to micro-finance
institutions and non-governmental organizations now appointed, which has been accepted by
RBI and banks advised accordingly.
In the beginning of the appointment as business facilitator/business correspondent, there
shall be quarterly review to judge the effectiveness as a business facilitator/business
correspondent; thereafter the review may be annual. The Business Facilitator/Business .
Correspondent may not be appointed in the village where the Banks branch is located.

PRECAUTIONS TO BE ADOPTED BEFORE

CORRESPONDENTS AND BUSINESS FACILITATORS

ENGAGING

BUSINESS

As seen before, before engaging Business Facilitators/Business Correspondents, their

capability will have to be evaluated thoroughly. This is usually done by the Bank is the form
of due-diligence check. The following are the steps involved in the due-diligence check:
(a)Interviewing the applicant in case of individuals and the office-bearers in case the
applicant is an institution.
(b)Verifying the track record and the present activities.
(c) Obtaining details about qualification, school/college last attended in the case of
individuals and in the case of NBFc, Society etc., copies of registration certificate,
Bye-Law, Constitution, list of office-bearers, financial papers of the last year.
(d)Undertake visit to the applicants place and the office as the case may be. In case of
companies, societies etc., verify the meeting register, minutes book, account books
and to check the copies provided as in C above with the original documents.
(e)Make market enquiries about the work, conduct, behavior and bonafides of the
individual by contacting, as far as possible, his friends, relatives, teachers, community
members and other known persons. Branch should also make market enquiries about
the reputation, work/activity of the institution and its office, in case of institutional
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applicants. This is to ensure that they are not engaged in any unwarranted and antisocial activities.
(f) To enquire and be satisfied about the applicants ability to bring-out a
perceptible change in the peoples attitude by bearing influence on them.
The due-diligence check so carried out should be documented.
RISKS AND THEIR MITIGAITON
As the outsourced activity exposes the banks to various kinds of risks, it will be
pertinent to examine the nature of risks that may arise to the banks due to the
deviations from the accepted role performance of the business facilitator/business
correspondent and how can they be mitigated. The following table will throw light on
the above:

Sr. No.

Risks

Risks Mitigation Techniques

1.

Stragetic Risk

The role/duties of Business Facilitator

shall be publicized through media for the

The service provider may conduct

information of the public, so that he/she

activities on its own behalf, which are

cannot enter into any other Activity on

inconsistent with the overall strategic

behalf of the Bank. The Branch Manager

goals of the regulated entity.

has to keep occasional check on the same.

An MOU can also be signed with the
stipulation that he/she shall not conduct
any activities on his/her own behalf or any
other inconsistent activity.

Inadequate expertise to oversee the

Service provider.
2.

Proper training shall be given to them

Reputation Risk
Poor Service from the service provider.

A feedback system from the customer

shall be developed. The market enquiry

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3.

Customer interaction by the service

from reputed persons of the village may

provider may not be consistent with the

also be be done.

overall standards of the regulated entity.

Proper training shall be given to them.

Compliance Risk
Privacy, consumer and prudential laws

The Business Facilitator/Business

not adequately complied with, by the

Correspondent shall not have access to the

service provider.

branch record.

Outsourced service provider has

In the event of breach of privacy, he/she

inadequate compliance system and

may be penalized or black-listed.

controls.

An undertaking to that effect shall be

Obtained.
The compliance system/controls
requirements shall be ensured by the
Branch while engaging Business
Facilitators/Correspondents.

4. Exit Strategy Risk

Appropriate exit strategies are not in

The role/duties of Business facilitators/

Place.

business correspondents is not highly

Over reliance on a single agency.

technical.

Loss of relevant skills in the regulated

The replacement is possible.

Entity.

Stand-by arrangement should be available

with the Bank.

5.

Contractual Risk
Inability to enforce the contract

The contractual capacity of the Business

Facilitators/Correspondents shall be

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Checked through due diligence check at

the time of engagement.
6.

7.

Access Risk
Hinders ability of the regulated entity to

Business Facilitators/Correspondents shall

provide timely data and other

work in rural places where the

information.

transactions shall be manual.

Concentration and Systemic Risk

Lack of control of Individual firms over a

Shall be checked through due diligence

service provider.

check and reporting system. The business

Systemic risk when considerable

shall be distributed through many

exposure to one single service provider.

Business Facilitators/ stand by

arrangement.

CHECKS AND BALANCES SYSTEM

Banks may install a proper and effective checks and balances systems in place to
counter various risks faced by banks in engaging the business facilitators/business
correspondents. They are as follows:
(1)The business facilitator/business correspondents shall identify the potential
borrowers and submit their loan applications to the branch. The branch should
verify the following documents to establish the identity of the borrower and
keep the copies on record:
Photograph of the applicant.
Residence Proof such as rent receipt, title deed, electric bill, ration card,
voters list, etc.
The information/data such as land record, quotations, licenses, permits, etc.
(2)As the applicants are from the distant villages, their identity can also be
established through witness of any reputed and respectable residents of that
village.

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(3)As far as possible, the details of the applicant should be got counter-checked
from any person of good credential of the respective village.
(4)The applicants should be called in the branch for completion of formalities.
(5) The business facilitator/business correspondent should have no say in the sanction
process or access to the books of account of the Bank.
(6) Before release of the loan sanctioned, pre-sanction inspection should be carried-out
and the execution of security documents should be done in the presence of the bank
officials.
(7) Credit should be released by making payment directly to the suppliers as far as
possible. Necessary bills/invoices should be held on record.
(8) Post-sanction inspection should be carried-out after disbursement to ascertain the
end-use of credit.
(9) Business facilitator/business correspondent should not be allowed to access any
banks book/record.
(10)
A feedback system should be developed to ensure the quality of service
offered by the business facilitator/business correspondents.
(11)
The branch officials should carry-out surprise checks to verify the
antecedents/bonafides of the borrowers.
Disbursement of small-value credit, recovery of principal and collection of interest etc., shall
be effected by the business correspondent as per pre-arrangement with the bank.
Financial inclusion will be faster achieved if it is technology driven. This is possible if
accounts of the rural people are opened on smart card on which the balance in the account
will be pre-loaded. Such cards have comprehensive multifunction/multiproduct capability.
They enable biometric fingerprint based identification and authentication. These cards will
be operated on hand-held devices available with the Business Correspondents. These devices
are on line as will as battery operated and have in-built capacity to print receipts for cash
received and also acknowledge payment transactions. Whenever any customer takes payment
of cash or deposit cash, the balance will automatically will get affected to his account. If the
customer approaches Business Correspondent at his/her premises and conducts business,
then the transaction will go on line to the Central processor. Alternatively, if the Business
Correspondent goes to villages and the transaction is carried-out off-line, then the device will
store the said transaction which will be communicated to the Central Processor in the
evening by connecting the device on line. For ordinary receipt and payment, the above
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system will get through without any problem. However, if the bank wants to use the system
for credit of loans sanctioned to such customers, then the branch will either keep hand-held
device on which it can pass-on the credit to the customer of the loan amount may be credited
in the Business Correspondents account that may in turn pass on the credit to the borrowers
card. Similarly, when customer repays the loan through the Business Correspondent, he will
issue receipt generated from the hand-held device immediately. However, in certain cases
like Post Offices or others, if the account is not opened on biometric cards, then the system
as applicable in the bank giving manual receipts etc., may be observed.
Generally, the Business Correspondents should have his own place in his/their area of
operation. He/she should be adequately informed on banking processes and use of
technology. Alternatively he/she should also employ such persons.
It is preferable that the Business Correspondents have on-line connectivity to receive and
transmit data to service-providers-central server/branch. The Business Correspondents
should be able to offer liquid security/collateral to the bank for making cash advance for dayto-day needs. In deserving cases, they may be offered cash-credit/loan to start with.

AREA OF OPERATION
The Business Facilitator/Business Correspondent Model is encouraged with the sole
intention to increase the Banks outreach to customers, especially in the unbanked centres.
Ideally, the area of operation of each rural and semi-urban branch may be extended in such a
manner as to cover at least 20-25 villages. The Business Facilitator/Correspondent may
therefore be engaged to take banking services to people and canvass/mobilize banking
business and offer limited banking services assigned to them respectively in the areas not so
far covered by any bank. It is thus possible to increase outreach of the banks branches and to
cover more and more rural/semi-urban population under financial inclusion, thereby
achieving its objective. This is also the Banks way for showing their commitments to those
who have so far remained out of the banks reach. Ideally, there could be one Business
Facilitator/Correspondent to cover 2-5 villages within a distance of 15 kilometers from the
banks branch, who shall also be a local person/entity. In this way, it may be within the
banks reach to achieve the target of opening 12.5 million new accounts each year as desired
by the Finance Minister recently to achieve the goal of speedy financial inclusion. In the case
urban branches, the distance criterion is 5 kms from the place of the business of the BC/BF
and the branch.
ETHICS TO BE OBSERVED BY BUSINESS FACILITATORS/BUSINESS
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CORRESPONDENTS
Public confidence and customer trust are the major planks on which banks build on their
reputation. The confidentiality and secrecy of the customer information is of paramount
importance, especially in rural areas, where message spreads very fast. The ethics that are to
be born in mind and practiced by the Business Facilitator and Business Correspondents are
as follows:
1. Give complete, factual and truthful information on the bank on various products and
other aspects
2. Protect and respect the privacy of the customer.
3. Should not compromise his personal interest to that of the Bank
4. Should treat all customers alike and with no disparity and with respect and dignity
5. Should not discriminate or differentiate the customers one against the other.
6. Should not harbor any caste or communal feelings.
TRAINING NEEDS AND HOW CAN IT BE MET
1. Business Facilitators/Business Correspondents shall need inputs on knowledge of
banks products which shall enable them to explain the schemes to public at large.
2. They shall also need training on competitive edge and superior features of the banks
products over the other banks products.
3. They may be imparted skill sets on marketing, influencing the people and crossselling of the banks other products.
4. In addition, the Business Correspondents should be given training on technology
related aspects.
5. The training inputs may also given to Business Correspondents for handling cash
receipts/payments, issue of receipts, accounting procedures, remittances etc.
DOS AND DONTS FOR BUSINESS FACILITATORS AND BUSINESS
CORRERSPONDENTS
As mentioned previously, public confidence and customer trust is a pre-requisite for the
outsourcing model to succeed and achieve its objective of financial inclusion. This should
reflect in every action taken by the Business Facilitators/Business Correspondents:
1. The confidentiality and the secrecy of the customer information in their custody is of
paramount importance. The BF/BC should maintain it completely.
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2. Their access to the customer information should be limited to those areas where the
information is required for performing the outsourced function. Other records should
not be made available to them.
3. They should be able to isolate and clearly identify the Banks customer information,
documents, records and assets to protect the Banks confidentiality.
4. They should be impartial and should not indulge in politics, caste-divisibility,
irrespective of the caste, creed or sex.
IT ENABLED FINANCIAL INCLUSION USING BC MODEL
The term Information Technology enabled Financial Inclusion can be as provision of
banking and financial services to the hitherto excluded population through the medium of
business correspondents with the help of latest developments in information and
communication technology. Pilots run by the banks have clearly established that the use of IT
solutions for achieving financial inclusion for making available banking facilities at the
doorsteps of the rural poor is not only viable but also holds the potential for scalability. In
these projects, banks have used smart cards for opening and operating bank accounts with
biometric identification. Use of the smart cards along with mobile or hand held devices
ensure that the transactions are recorded in the banks books on real time basis. Some of the
State Governments are routing Social Security payments and also payments under the
National Rural Employment Guarantee Scheme through smart cards. It is now evident that
the same delivery channel can be used for providing other financial services like low cost
remittances and insurance.
These pilots have shown that banks can leverage the use of IT is to handle huge volume of
transactions emanating from the vast population in the rural areas. Moreover, while the IT
enabled banking outreach may not be as costly as establishing a branch in the rural areas it is
expected that the delivery costs in the IT driven financial inclusion will come down as and
when the scheme is up-scaled.
Banks, both in the public sector and the private sector, have made huge initiatives towards IT
Enabled Financial Inclusion using the Business Correspondent Model for reaching the unreached. A write-u on the structure and functions of three such Business Correspondent
Models under implementation with different banks two from the Public Sector (Annexure 1
and 2) and a third one from the Private Sector (Annexure 3) along with a case of a section 25
IT Company (Annexure 4) follows this unit for the benefit for the readers. On studying the
details of these models, the reader should be able to appreciate how the Information and
Communication Technology can be used for the benefit of the rural poor hitherto excluded
from the formal banking sector. The four cases also document the process of financial
inclusion through the BC model.
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LET US SUM UP
Branchless banking can greatly extend the distribution of financial services to poor and
hitherto excluded, both by reducing the cost of delivery (by renting and maintaining building,
and handling low value transactions directly) and by reducing the cost to customers by
accessing services (travel and queuing time and thus foregoing the days wage income).
There was therefore a great deal of excitement in 2006 when RBI permitted the use of the
business correspondents for increasing the client coverage by banks branches. As only 27
percent of rural households and access to financial services, the Rangarajan Committee
sought this figure to be raised to 50 percent by 2012 and 100 percent by 2015. The Business
Correspondent Model, riding on appropriate technology, is the core of the strategy for
banks to achieve this, with the goal of having at least one BC in every village.
A BF or BC will act as an intermediary between bank and its customers generally in
customer identification and marketing of bank products. A BC can also transact on cash on
behalf of the bank. The BC/BF should have adequate knowledge of bank products,
procedures and technology. Individuals, firms, NGOs and NBFCs can perform the role of
Business Correspondents.
KEY WORDS
Branchless Banking, Business Facilitator, Business Correspondent, Rangarajan Committee,
Non-Government Organisation (NGO), Empathy, Small Value Transaction, Core Strategy,
Strategic Risk, Reputation Risk, compliance Risk, Exit Strategy Risk, Access Risk,
Concentration Risk, Contractual Risk, Systemic Risk, Point of Sale (POS) Machine, Point of
Transaction (POT) Device, Biometric Card, Smart Card Reader, Village Sarpanch, Risk
Mitigation, Checks and Balances, Borrower Profile, Debt (Credit) Counselling, EMI

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