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As a part of its nancial inclusion plan, the RBI started the Business
LIC e-Term Plan Review under
Correspondent model in 2006. Business Correspondents (BCs) are
Insurance
representatives appointed by banks to act as their agent. BC’s provide banking
Pradhan Mantri Suraksha Bima
services in remote locations where the bank may not have a presence. Till 2-3
Yojana Review under Insurance
years back it was very di cult for poor villagers to open a bank account because
of legal and administrative hassles. Moreover many remote villages do not have TCS Dividend Payment History
bank branches. Analysis and Insights under
Research
Business Correspondent companies open small o ces in remote villages, and in
partnership with a bank, help poor villagers to open bank account, take a loan or
to transfer money. Business correspondent model is therefore a partnership Search
model. However, each of the partners have di erent roles and responsibilities. In
this article, I have discussed Business Correspondent Roles and
Responsibilities. Recent Posts
As per RBI:
India Income Tax Saving Options
Business Correspondents are retail agents engaged by banks for 2018 under 80C
providing banking services at locations other than a bank branch/ATM.

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5/8/2019 Business Correspondent Roles and Responsibilities – Mkerj

Banks are required to take full responsibility for the acts of omission Neural Network Example in R Cube
and commission of the BCs that they engage. Root
BCs enable a bank to expand its outreach and o er limited range of
banking services at low cost, as setting up a brick and mortar branch Suryoday Small Finance Bank
may not be viable in all cases. Growth Plan
BCs, thus, are an integral part of a business strategy for achieving
Varishtha Pension Bima Yojana
greater nancial inclusion.
2017 Wiki

Basant Maheshwari’s Strategy for

As per State Bank of India: “The BC arrangement essentially means enrolling
Identifying Multibagger Stocks
customers and enabling the transactions of the customers at the Customer
Service Points (CSPs) besides sourcing various deposit and loan products for the Airtel Payments Bank Wiki

Bank as a Business Facilitator.” You Can be Rich A Practical Guide

to Financial Planning Book Review
Commission Model
ESAF Micro nance to become
business loan small open bank accounts Small Finance Bank
low loans

Utkarsh Micro Finance Capital

Business Correspondents work on commission model. They will get from bank a
Raise
commission for every new account opened, for money transfer transactions or
for new loans disbursed. It is a volumes-game for BC companies. As per RBI Demonetization of Indian Currency
– A Detailed Study Part 3
the banks may pay reasonable commission/ fee to the BC, the rate and
quantum of which may be reviewed periodically
BC are speci cally prohibited from charging any fee to the customers
directly for services rendered by them on behalf of the bank.
Commission structure or incentive mechanism should be devised in a
manner that mere increase in the number of clients served or the
transaction volume does not drive the commission.

Eligibility Criteria for Business

Correspondent
As per RBI, banks may engage the following individuals/entities as BC:

retired bank employees

retired teachers
retired government employees
ex-servicemen
individual owners of kirana / medical /Fair Price shops
individual Public Call O ce (PCO) operators
agents of Small Savings schemes of Government of India/Insurance
Companies
individuals who own Petrol Pumps
authorized functionaries of well run Self Help Groups (SHGs) which are
linked to banks
any other individual including those operating Common Service
Centres (CSCs)
NGOs/ MFIs set up under Societies/ Trust Acts and Section 25
Companies
Cooperative Societies registered under Mutually Aided Cooperative Subhodeep
Societies Acts (MACS)
Cooperative Societies Acts of States Mukhopadhyay
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5/8/2019 Business Correspondent Roles and Responsibilities – Mkerj

Multi State Cooperative Societies Act

Post O ces I am an independent Management
Companies registered under the Indian Companies Act, 1956 with large
Consultant. In my previous
and widespread retail outlets
corporate career, I have worked in
non-deposit taking NBFC (NBFCs-ND)
Banking, Private Equity and
Software industry. I like doing

Business Correspondent Roles equity research and nancial

analysis in my free time. I also

and Responsibilities – enjoy reading and writing on

history and current a airs related

Awareness and Financial matters.

Literacy View Full Pro le

BCs are to create awareness about savings and other products and provide →
education and advice on managing money and debt counselling.

1. A BC must create awareness of nancial options among villagers, even

before they start with products.
2. They should tell the poor people how best to save,invest and get loans.
3. Then they must explain the partner banks’s suitable products for the
villagers needs.

As per Reserve Bank of India (RBI): “Financial literacy and customer education

should form an important part of the business strategy and should form part
of the commitment by banks adopting the BC model. Banks may scale up their
e orts substantially towards educating their clientele in their respective
vernacular languages regarding the bene ts of banking habit. Information
regarding BCs engaged by banks may be placed on the respective banks’
websites. The Annual Report of the banks should also include the progress in
respect of extending banking services through the BC model and the initiatives
taken by banks in this regard. The banks may also use print and electronic media
(including in the vernacular language) to give wide publicity about
implementation of the BC model by them.”

Business Correspondent Roles

and Responsibilities – Eligibility
and Enrollment of New
Customers
A BC must collect and process initial loan applications including veri cation of
primary information/data.

legal offices analyze data invest advisor

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1. A Business Correspondent company must identify prospective

customers for various nancial products o ered by Bank.
2. The BC must verify the eligibility of customers for the Financial
Products based on the eligibility criteria provided by Bank from time to
time.
3. The BC company will enroll target customers for various Financial
Products on behalf of his partner bank.
4. The Business Correspondent will only sell the Financial Products to
eligible customers based on the partner Bank’s guidelines.
5. The BC will recommend small loans to target customers.
6. BC will help bank in collecting KYC information (Know Your Customer)
information from time to time.

With regards to KYC, the RBI state: “KYC and AML procedures, as laid down in the
Master Circular DBOD.AML.BC. No.2/ 14.01.001/ 2010-11    dated   July 1, 2010
and subsequent circulars on the subject should be followed in all cases.  The
banks may, if necessary, use the services of the BC for preliminary work relating
to account opening formalities.  However, ensuring compliance with KYC and
AML norms under the BC model continues to be the responsibility of banks.”

Business Correspondent Roles

and Responsibilities –
Disbursing and Collection
1. The BC will disburse small loans, such as agricultural loans, group
loans, entrepreneurial loans etc based on the partner banks
guidelines.
2. The Business Correspondent collect payment and fees from Customers
as per partner banks guidelines.
3. For a loan product, BS will help with collection of principal and interest
abiding strictly by code of conduct.
4. Post-sanction monitoring to be done by BC.
5. BCs to do collection of small value deposits.
6. Receipt and delivery of small value remittances/ other payment
instruments to be done by BC.

Business Correspondent Roles

and Responsibilities – Others
1. A BC may cross-sell micro insurance, mutual fund products, pension
products and other suitable third party products.
2. BC will be involved in cash handling in terms agreeable to partner
bank.
3. BC has to inform the local branch/ centralized hub of Bank/ NBFC
about the closure of any accounts.
4. On the death of account holder, BC must inform the bank about
deactivation of the account.

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5. A Business Correspondent assumes all the risk associated with

handling of cash at ground level.

List of Circulars issued by the

RBI to Scheduled Commercial
Banks (including RRBs) on use
of BCs:
DBOD.No. BL.BC. 58/22.01.001/2005-06 dated January 25, 2006
DBOD.No. BL.BC. 72/22.01.009/2005-06 dated March 22, 2006
DBOD.No.BP.40/21.04.158/2006-07dated November 3, 2006
DBOD.No. BL.BC.74/22.01.009/2007-08 dated April 24, 2008
DBOD. No. BL.BC.35/22.01.009/2008-09 dated August 27, 2008
DBOD.No.BL.BC.36/22.01.009/2008-09 dated August 27, 2008
DBOD.No. BL.BC.129/22.01.009/2008-09 dated April 24, 2009
DBOD. No. BL.BC.63/22.01.009/2009-10 dated November 30, 2009
DBOD. No. BL.BC.99/22.01.009/2009-10 dated April 26, 2010
DBOD.No.BAPD.BC.122/22.01.009/2013-14 dated June 24, 2014

Reference

ttp://pmkvyo cial.org/App_Documents/QPs/BFSI%20SSC%20QP%20an
d%20NOS-BCBF.pdf
Financial Inclusion by Extension of Banking Services – Use of Business
Correspondents (BCs)
https://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=8955
Discussion Paper on Engagement of ‘for-pro t’ Companies as Business
Correspondents
Business Correspondent (BC) Arrangement

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A Few Last Words

Before making any investment decision, please contact your nancial adviser.

I have provided this article for educational purpose only.

I hope you found this article on Business Correspondent Roles and

Responsibilities useful. If you have something to add please leave a comment in

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the post. Please feel free to contact me.

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Subhodeep Mukhopadhyay
I am a Management Consultant in the Education Sector. In my
previous corporate career, I have worked in Banking, Private Equity
and Software industry. I am an MBA in Finance/ Computer Engineer
and enjoy doing equity research and nancial analysis in my free
time.

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