On September 28, 2010, Reserve Bank of India (RBI), as part of its Financial Inclusion mandate, announced in the Annual Policy Statement for the year 2010-11, that it has decided to permit banks to engage companies registered under the Indian Companies Act, 1956, excluding Non Banking Financial Companies (NBFCs), as Business Correspondents (BCs) in addition to the individuals/entities permitted earlier, subject to compliance with its existing guidelines for engaging BCs. Further, the RBI has allowed banks to engage with the CSC Operators/VLEs as BCs.
Further, on February 15th 2011, Sonia Gandhi launched the Swabhiman Scheme in New Delhi. The objective the Scheme is to make banking facility available to all citizens and the initial target is to get 5 crore accounts opened by Mar 2012. The Scheme will also ensure loans and other credit facilities for farmers and villagers at subsidized rates.
As per the RBI guidelines, the BC model is as follows:
- While an organization can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC or Customer Service Point (CSP) shall represent and provide banking services of only one bank.
- The terms and conditions governing the contract between the bank and the BC should be carefully defined in written agreements and subjected to a thorough legal vetting.
- While drawing up agreements, banks should strictly adhere to instructions contained in the guidelines on managing risks and code of conduct in outsourcing of financial services by banks, issued by Reserve Bank of India on November 3, 2006.
- The banks will be fully responsible for the actions of the BCs and their retail outlets / sub agents.
Thus, financial inclusion has become a mandate for all banks, with clear targets created as part of their Financial Inclusion Plan that have been approved by RBI. As a result, the Banks have signed BC agreements with various telecom providers (Airtel, Vodafone, etc) and technology solutions providers (Tata Consultancy Services, Oxigen, etc) and financial payment systems (A Little World-ALW, Eko, FINO, etc) to deliver financial services.
Further, SCAs in a number of States around the Country have taken the initiative to become BCs, enabling CSCs to become customer service points that deliver various banking and financial services. Further, in some cases, the SDAs are proactively supporting these initiatives, thereby increasing the sustainability of these initiatives.
Thus it is believed that the Common Service Centers can become an effective vehicle to deliver financial services to rural India, through the BC model, enabling banks to meet their financial inclusion mandates.