Business Correspondents are the representatives of the bank. They help people in the remote villages with banking activities.
Business Correspondent model was started in the year 2006 by the Reserve Bank of India as a part of its financial inclusion plan. They are the representatives of the banks to act as their agent in the remote villages where the bank is not operating. Until a couple of years ago, it was difficult for the people in the remote villages to open a bank account as there was no bank in their village and also they were put to legal an administrative hassles. Business Correspondent agents open small offices in remote villages in partnership with the bank so that they can help the villagers open a bank account, take a loan or transfer money. Thus, the Business Correspondent model is a partnership model and they have their own roles and responsibilities which we will see here.
Roles and Responsibilities of Business Correspondents:
The Business Correspondents have a well-defined roles and responsibilities and the same are given below.
- First of all, a Business Correspondent (BC) has to create an awareness about savings and other products. They have to educate the poor villagers about the importance of saving, managing the money and also debt counseling.
- BCs must identify prospective customers for various financial products offered by Bank
- They have to verify the eligibility of customers for the Financial Products based on the eligibility criteria provided by the bank from time to time.
- They will enroll target customers for various financial products on behalf of his partner bank.
- The BCs will sell the financial products to eligible customers based on the partner bank’s guidelines.
- The BCs will recommend small loans to target customers
- The BCs will help the bank in collecting the KYC information from time to time.
- The BCs will disburse small loans such as agricultural loans, group loans, entrepreneurial loans, etc. based on the partner banks guidelines
- The BCs will collect payment and fees from Customers as per partner banks guidelines.
- For a loan product, BS will help with the collection of principal and interest and should abide by the strict code of conduct.
- Post-sanction monitoring to be done by BC
- BCs to do collection of small value deposits.
- Receipt and delivery of small value remittances/other payment instruments to be done by BC.
- A BC may cross-sell micro insurance, mutual fund products, pension products and other suitable third party products.
- The BC will be involved in cash handling in terms of agreeable to partner bank.
- BC has to inform the local branch/centralized hub of Bank/NBFC about the closure of any accounts.
- On the death of account holder, BC must inform the bank about deactivation of the account.
- A BC assumes all the risk associated with the handling of cash at ground level.
Normally, a Business Correspondent works on commission basis. They will get commission from the bank for every new account opened, for money transfer, for new loans disbursed, etc. It is a volume game for BC companies. As per RBI guidelines, they should be provided paid commission or a fee and the rate and quantum of the same will be reviewed periodically. However, a BC cannot charge any fee from the customers directly for any services rendered by them on behalf of the bank. Further RBI has stated that the commission structure or incentive mechanism should be devised in a manner that mere increase in the number of clients served of the transaction volume does not drive the commission.
Some of the people engaged by the banks as BCs are retired bank employees, retired teachers, ex-serviceman, retired government employees, NGOs, NBFCs, Post offices, etc. Those who are interested in becoming one might get in touch with the bank in your area and they will provide you with further guidelines.