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Best Village Business Ideas - Government of India initiative and Reserve Bank of India backed - Business Correspondents (BCs) Model of Banking - Banking Small Business Ideas

Business Correspondent (BC) Model of Banking:

With a vision to enhance financial inclusion and provide last mile delivery of banking services in a viable manner for both the banks and the last-mile households, the Government of India has deployed Business Correspondent (BC) model of banking. The BCs are managed by the Outreach Banking units and provide a wide plethora of financial services and help in enhancing financial literacy in their respective catchments. [Also Read: Great Lock down Business Idea - Vehicle Sanitisation]

BCs help us increase the Banks & NBFCs reach by providing banking services at the last mile to the population. BCs leverage their local expertise and knowledge to provide access to formal sources of credit and financial services to the unserved and underserved segment.

Best Village Business Idea Business Correspondent BC Model of Banking Business - Banking and Finance

BCs are considered as partners who provide valuable insights and understandings of the local market and help the Banks & NBFCs to serve the target population. By providing the platform and by using technology as an enabler, the BC partners help Banks and NBFCs to deliver most of the services that are offered at a typical bank branch from the BC establishment itself. 

With this, the Banks & NBFCs, through the vision of Government of India, promote entrepreneurship and help conclude a large volume of low-value transactions in a viable manner. The revenue generated is shared in a transparent and mutually agreed manner between the Banks & NBFCs and the BCs. [Also Read: Amazon Delivery Partner Business Idea]

Functions of a Business Correspondent (BC):

Each of the BC points is linked to a base branch of the respective the Banks & NBFCs and can perform various banking activities like account opening, cash deposit, cash withdrawal, NEFT, RTGS, Bill Payments for the customers. BCs can also sell products like Insurance, Mutual Fund and can source Fixed Deposits and RDs. [Also Read: Buy and Sell Copra Business Idea]

BCs can also source loans in their catchment area. It is mandatory that the BCs work exclusively with their respective Banks & NBFCs and not with any other banks/financial institutions. This procedure changes from Bank to Bank and NBFCs, depending on their criterias and Terms, which can be discussed while signing up.

Best Village Business Idea Business Correspondent BC Model of Banking Business - BC Role

BC’s are not expected to take any favor in cash or kind from the customers and will be compensated by the Banks & NBFCs on the basis of the transactions they complete for the customers. Each Banks & NBFCs have a completely variable model of remunerating the BCs where the commissions earned by them will be proportional to the banking services and activities he/she performs and the loans he/she sources. [Also Read: Innovative Broken Almond Business Idea]

To clarify, the more banking transactions a BC helps conclude through the Banks & NBFCs, the more that individual BC would earn. The BCs are expected to always perform activities in the best interest of the customer and in no way manipulate things for his/her self-interest. As per regulatory guidelines, each BC is expected to work for at least 4 hours a day and for 5 days a week. He/she can very well work for longer hours and serve his customers effectively. Each of our BC will be supported by a BC manager.

The BCs would have to pay a security deposit, with the Banks & NBFCs depending on their clauses and terms. The marketing expenditures will be borne by the Banks & NBFCs and the only investment that the BC is expected to make is on the hardware and for the maintenance and upkeep of his premises. [Also Read: Buy and Sell Clothing Business Idea]

For third-party products like insurance and mutual funds, the compensation will be shared between the bank and the BC. The product & service specific commercials will vary from time to time depending on both regulatory and bank policies and guidelines. The sharing ratio will be published to the BCs up on appointment.

The BCs can provide additional services such as Mobile, DTH recharge, Atal Pension Yojana enrolment, provide DBT benefits for their customers. The BC is expected to maintain a relationship with his/her customers and be a responsible citizen in the local community. The BCs are responsible for their cash handling and storage. [Also Read: Profitable Business Ideas - Dish wash Detergent Business]

A detailed video presentation is provided below with more insight and information. Watch the video completely and continue beneath for RBI Notices and contact references.

Reserve Bank of India (RBI) Notice:

For more details on the Business correspondents, refer the RBI Notification dated Sep 28, 2010 below via RBI/2010-11/217 - DBOD.No.BL.BC.43 /22.01.009/2010-11.

Guidelines for engaging of Business Correspondents (BCs)

The scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) may engage Business Correspondents (BCs) subject to compliance with the following guidelines : [Also Read: Best Business Idea - Milk Powder Trade]

1. Introductory

The banks may formulate a policy for engaging Business Correspondents (BCs) with the approval of their Board of Directors. Due diligence may be carried out on the individuals/entities to be engaged as BCs prior to their engagement. The due diligence exercise may, inter alia, cover aspects such as (i) reputation/market standing, (ii)  financial soundness, (iii) management and corporate governance, (iv) cash handling ability and (v) ability to implement technology solutions in rendering financial services.

2. Eligible individuals/entities

The banks may engage the following individuals/entities as BC.

i) 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); [Check on, how to make 200% profit with Kids Toys – A Best Business Idea]

ii) NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies ;

iii) Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act;

iv) Post Offices; and

v) Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, excluding Non Banking Financial Companies (NBFCs).

3. BC Model

 While a BC 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 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. [Also Know: How to Register Paytm Seller Account– Step by Step Process]

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.

4. Scope of activities

The scope of activities may include (i) identification of borrowers; (ii) collection and preliminary processing of loan applications including verification of primary information/data;  (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling;  (iv) processing and submission of applications to banks;  (v) promoting, nurturing and monitoring of Self Help Groups/ Joint Liability Groups/Credit Groups/others; (vi) post-sanction monitoring; (vii) follow-up for recovery, (viii) disbursal of small value credit,  (ix) recovery of principal / collection of interest  (x) collection of small value deposits (xi) sale of micro insurance/ mutual fund products/ pension products/ other third party products and  (xii) receipt and delivery of small value remittances/ other payment instruments. [Also Read: Best in Industry Great Business Opportunity with JioMart]

The activities to be undertaken by the BCs would be within the normal course of the bank's banking business, but conducted through the BCs at places other than the bank premises/ATMs.
Best Village Business Idea Business Correspondent BC Model of Banking Business - BC Strategy

5. KYC Norms

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.

6. Customer confidentiality

The banks should ensure the preservation and protection of the security and confidentiality of customer information in the custody or possession of BC. [Also Read: Farming Business Idea - Hydroponics]

7. Information Technology Standards

The banks should ensure that equipment and technology used by the BC are of high standards.

8. Distance Criterion

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. 

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 centers. 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. [Also Read: Ready Made Samosa Business Idea]

9. Payment of commission/fee

The banks may pay reasonable commission/ fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement with the BC should specifically prohibit them 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. The remuneration should combine fixed and variable parts dependent, inter-alia, on some indication or measure of customer satisfaction. Some part of the variable remuneration could be deferred or clawed back in case of deficiency of service.

The banks (and not BCs) are permitted to collect reasonable service charges from the customers in a transparent manner. [Also See: Manufacturing Business Idea, Low Investment LED Business]

10. Transactions put through BC

As engagement of intermediaries such as Business Facilitators/ Correspondents involves significant reputational, legal and operational risks, due consideration should be given by banks to those risks. The banks should adopt technology-based solutions for managing the risk, besides increasing the outreach in a cost effective manner. 

The transactions should normally be put through ICT devices (handheld device/mobile phone) that are seamlessly integrated to the Core Banking Solution (CBS) of the bank. The transactions should be accounted for on a real time basis and the customers should receive immediate verification of their transactions through visuals (screen based) or other means (debit or credit slip). [Know about the on-demand Business Idea – Highly Profitable Garden Seeds Trade]

In formulating their schemes, banks may, inter alia, be guided by the recommendations made at Chapter III of the Khan Group Report as also the  outsourcing guidelines released by Reserve Bank of India on November 3, 2006 (available on RBI website: The arrangements with the BC shall specify:

i) suitable limits on cash holding by intermediaries as also limits on individual customer payments and receipts;

ii) cash collected from the customer should be acknowledged by issuing a receipt on behalf of the bank;

iii) that all off-line transactions are accounted for and reflected in the books of the bank by the end of the day; and

iv) all agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the BC.

11. Internal Control & Monitoring

The banks should carry out a detailed review of the performance of various BCs engaged by them at least once in a year and they should monitor the activities of BCs through their Controlling Offices and also through various fora under Lead Bank Scheme i.e. (SLBC, DLCC, BLBC).  The internal control mechanism in the bank should include visit to BCs and interface with customers at periodical intervals. [Read: Energy Efficient Business Idea, the hottest new business Cool Roofs]

12. Consumer Protection Measures

The banks should take all measures to protect the interests of the customers. Some such safeguards are outlined below:

The retail outlet/sub-agent of the BC should be personally introduced to the members of public by the bank officials in the presence of village elders and government functionaries in a public meeting so that there is no misrepresentation/impersonation.

The products and processes should be approved by the banks and the company should not introduce any product/process without the approval of the bank concerned.

Best Village Business Idea Business Correspondent BC Model of Banking Business - Rural Banking

Each retail outlet/sub-agent may be required to post a signage indicating their status as service providers for the bank as also disclose the name of the BC, the telephone number of the base branch/controlling office of the bank and  the Banking Ombudsman and the fees for all services available at the outlet.

Financial services offered by the retail outlets/sub-agents of the BC should not be tied to the sale of any product of such company.

The charges for offering various services should be indicated in a brochure and made available at the retail outlets/with the sub-agents. [Read on a Hot New Business Idea, Wholesale Crushed Ice and Ice Slab Business]

The banks should develop suitable training modules in the local language(s) in order to provide proper attitudinal orientation and skills to the BCs/sub-agents.

As a measure of social audit, there could be periodic block level meetings where members of the public are invited along with the BCs operating in the area as also the linked branch managers to express their difficulties and to obtain feedback. The Lead District Manager (LDM) of the lead bank could attend such meetings in the district to get direct feedback and provide such feedback to the controlling offices.

The bank should have a necessary Business Continuity Plan (BCP) in place to ensure uninterrupted service in case the agency arrangement with the companies/ sub-agents are terminated.

In case a company is engaged as BC by more than one bank, it should be ensured that the customer database and account details are kept separate and there is no co-mingling of data.

13. Redressal of Grievances

The banks should constitute Grievance Redressal Machinery within the bank for redressing complaints about services rendered by the BCs and give wide publicity about it through electronic and print media. The name and contact number of the designated Grievance Redressal Officer of the bank should be made known and widely publicized. 

The designated officer should ensure that genuine grievances of customers are redressed promptly.  The grievance redressal procedure of the bank and the time frame fixed for responding to the complaints should be placed on the bank's website.  If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the compliant, he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his grievance/s. [Also See: Great Business Idea, Engine Oil - Motor Oil reselling Business]

14. Customer Education

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 efforts substantially towards educating their clientele in their respective vernacular languages regarding the benefits 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. [Also See: Best Business Corrugated Box Manufacturing]

Further notification on Dec 10, 2010 via RBI/2010-11/308 - UBD.BPD. (PCB). Cir. No 28/09.18.300/2010-11, Financial Inclusion by Extension of Banking Services – Use of Business Correspondents / Business Facilitators by Urban Co-operative Banks.

Application Links:

For Application of Business Correspondents with the mentioned Banks and NBFCs below, refer the links provided against them;

Training and Assistance:

For Training and Assistance reach-out the below contact;

Business Correspondent Federation of India 
Enterprise, D-128-129, Okhla Industrial Area,
Phase 1, New Delhi, 110020. INDIA
Phone - +91-11-4051-7000 
Email -

Website - http://bcfi 
Contact Form - http://bcfi/contact-us

About BCFI - Business Correspondent Federation of India (BCFI) is the national federation of Corporate Business Correspondents (CBCs) and Agent Business Correspondents (ABCs) in India. It is a not-for-profit organization that aims to promote responsible finance by systematizing and harmonizing the delivery of financial services to the poor through the critical last mile i.e. the ABCs. [Also See: Work from Home Business, Pulse Oximeter Reselling]

The federation inter-alia also does policy advocacy, promotes financial literacy and customer awareness. BCFI undertakes studies, workshops/conclaves and supports collaborative development activities related to financial inclusion in general and the BC sector in particular. The federation works with its stakeholders towards setting up a quality network, standardized systems and processes that address both supply and demand side challenges holistically.

BCFI (with support from World Bank/IFC, DFID, SIDBI) is currently implementing five significant programmes for the BC sector: [Know about the Small Business Idea, Cleanliness based Chlorine Bleach Powder Business]

  1. Training, certification and BC registry
  2. Standards
  3. Code of conduct (COC)
  4. Grievance redressal mechanism (GRM)
  5. Technology platforms (web and app)

Besides the shared contact references there are more Banks and NBFCs which offer the Business Correspondent (BC) opportunity in the wide enterprise market, where there can be great benefits and margins. It’s at the liberty of the aspiring entrepreneurs to explore the contacts and work on the probabilities. The contacts shared are neither recommended nor endorsed, however provided for reference purpose. Use the concept and the contacts wisely.

Success usually comes to those who are too busy to be looking for it.

Happy Business!

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