RBI Guideline on Use of Business Correspondents by Banking Sectors

Please refer to para­graph 26 of the First Bi-month­ly Mon­e­tary Pol­i­cy State­ment, 2014–15 announced on April 1, 2014 which stat­ed that “On finan­cial inclu­sion, the fourth pil­lar, the rec­om­men­da­tions of the Mor Com­mit­tee on accel­er­at­ing the flow of cred­it to those at the bot­tom of the pyra­mid and enlarge­ment of catch­ment area of the Busi­ness Cor­re­spon­dents (BCs), includ­ing through pos­si­ble inclu­sion of new enti­ties as BCs, are under examination”. 

2. Tak­ing into account the rec­om­men­da­tions of the Mor Com­mit­tee, the exist­ing guide­lines on appoint­ment of Busi­ness Cor­re­spon­dents (BCs) have been reviewed as under:

i) Eli­gi­ble individuals/entities

It has been decid­ed that RRBs will be per­mit­ted to engage non-deposit tak­ing NBFCs (NBFCs-ND) as Busi­ness Cor­re­spon­dents, sub­ject to the fol­low­ing conditions:

a) It should be ensured that there is no comin­gling of bank funds and those of the NBFC-ND appoint­ed as BC.

b) There should be a spe­cif­ic con­trac­tu­al arrange­ment between the RRB and the NBFC-ND to ensure that all pos­si­ble con­flicts of inter­est are ade­quate­ly tak­en care of.

c) RRBs should ensure that the NBFC-ND does not adopt any restric­tive prac­tice such as offer­ing sav­ings or remit­tance func­tions only to its own cus­tomers and forced bundling of ser­vices offered by the NBFC-ND and the RRB does not take place.

d) RRBs may be guid­ed by our cir­cu­lar RPCD.No.RRB.BC.25/03.05.34/98–99 dat­ed Sep­tem­ber 15, 1998 on Finan­cial Assis­tance to NBFCs – Sur­plus Non-SLR Funds (copy enclosed).

 ii) Dis­tance criteria

In terms of cir­cu­lar DBOD No BL BC 43/22.01.009/2010–11 dat­ed Sep­tem­ber 28, 2010, with a view to ensur­ing ade­quate super­vi­sion over the oper­a­tions and activ­i­ties of the retail out­let/­sub-agent of BCs by banks, every retail out­let/­sub-agent of BC is required to be attached to and be under the over­sight of a spe­cif­ic bank branch des­ig­nat­ed as the base branch and the dis­tance between the place of busi­ness of a retail out­let/­sub-agent of BC and the base branch should ordi­nar­i­ly not exceed 30 kms in rur­al, semi-urban and urban areas and 5 kms in met­ro­pol­i­tan cen­tres. In case there is a need to relax the dis­tance cri­te­ri­on, the Dis­trict Con­sul­ta­tive Com­mit­tee (DCC)/State lev­el Bankers Committee

(SLBC) could con­sid­er and approve relax­ation on mer­its in respect of under-banked areas etc. With a view to pro­vid­ing oper­a­tional flex­i­bil­i­ty to RRBs and in view of the tech­no­log­i­cal devel­op­ments in the bank­ing sec­tor, it has been decid­ed to remove the stip­u­la­tion regard­ing dis­tance cri­te­ria. The RRBs should, how­ev­er, while for­mu­lat­ing the Board approved pol­i­cy for engag­ing BCs, keep in mind their noti­fied area of oper­a­tions and the objec­tives of ade­quate over­sight of the BCs as well as pro­vi­sion of ser­vices to cus­tomers while decid­ing how to mod­i­fy extant dis­tance criteria.

3. RRBs may con­tin­ue to take mea­sures to address pos­si­ble rep­u­ta­tion­al risks aris­ing out of appoint­ment and func­tion­ing of BCs.

4. All oth­er instruc­tions regard­ing the BC mod­el will remain unchanged.

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