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Business Correspondent Model

Business correspondent model

Business correspondent model – What is it

A business correspondent model is a program where banks have been given permission by the RBI to use the services of NGOs/SHGs, Micro Finance Institutions (MFIs), and other Civil Society Organizations (CSOs) as intermediaries in providing Financial and Banking services through the use of the business correspondents in order to ensure greater Financial Inclusion and increase outreach of the banking sector.

Now almost 600,000 village habitations in India are getting basic banking services due to the services being provided under the business correspondent model. It can be said that business correspondents are playing a crucial role in promoting financial inclusion.

What purposes do business correspondents serve?

Business correspondents are responsible for performing a wide range of tasks, such as –

  • Identifying borrowers
  • Collecting small value deposits
  • Disbursing small value credit
  • Recovering principal and collecting interest
  • Selling micro insurance, mutual funds, pensions and other third-party products
  • Receiving and delivering small value remittances and promoting savings and other products
  • Providing education and advice on money management and debt counseling.

Business correspondent agent

Business correspondent agent – An overview

A business correspondent agent is a branch of a bank that offers consumers in outlying areas banking and financial services at their doorstep. Thousands of Business Correspondents (BCs) are being currently been hired by the banks to serve underserved and untapped geographic areas throughout the nation. Banks are obligated to assume full responsibility for the actions of the business correspondent agent they hire, so they must exercise meticulous due diligence and put in additional protections to reduce agency risk.

Overall, the business correspondent model is helping in bringing the Indian masses under the umbrella of financial inclusion.

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