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Business Correspondents

Topics Covered: Inclusive growth and issues arising from it.

Business Correspondents

What to study?

For Prelims: What are CSCs and who are BCs, BCs- objectives, eligibility and functions.

For Mains: Significance and measures for financial inclusion.

Context: SHG women working as Business Correspondents for banks (BC Sakhis) and Bank Sakhis playing a vital role in disbursement of first tranch of ex-gratia of Rs.500/- to women PMJDY accounts amidst COVID-19 Lockdown.

Who are Business Correspondents?

Business Correspondents are retail agents engaged by banks for providing banking services at locations other than a bank branch/ATM.

Banks are required to take full responsibility for the acts of omission and commission of the BCs that they engage and have, therefore, to ensure thorough due diligence and additional safeguards for minimizing the agency risk.

What they can do?

  • BCs are permitted to perform a variety of activities which include identification of borrowers, collection and preliminary processing of loan applications including verification of primary information/data, creating awareness about savings and other products, education and advice on managing money and debt counseling, processing and submission of applications to banks, promoting, nurturing and monitoring of Self Help Groups/ Joint Liability Groups, post-sanction monitoring, follow-up of recovery.
  • They can also attend to collection of small value deposit, disbursal of small value credit, recovery of principal / collection of interest, sale of micro insurance/ mutual fund products/ pension products/ other third party products and receipt and delivery of small value remittances/ other payment instruments.

Who can be engaged as BCs?- The banks may engage the following individuals/entities as BC:

  1. Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana / medical /Fair Price shops, individual Public Call Office (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).
  2. NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies.
  3. Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act.
  4. Post Offices.
  5. Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, excluding Non Banking Financial Companies (NBFCs).

Insta Links:

Prelims Link:

  1. Who can be engaged as BCs?
  2. What are CSCs?
  3. Eligibility for PMJDY.
  4. Benefits under PMJDY.

Mains Link:

Who are Business Correspondents? Discuss their significance and role in enhancing financial inclusion in the country.

Sources: pib.