Banking Business Correspondents, the new outsourcing space

RBI has adopted a major strategy to promote financial inclusion by approving Business Correspondents Model (BC). The Business Correspondents comes under the Rural Banking Project. The Business Correspondents act as the representatives of the banks who extend banking services to the population especially in the rural areas. BC is the new concept in outsourcing where the banks outsource their banking service meet the financial needs of the rural population, where banks don’t have a direct reach. The move will bring about a static change in the economic status of the country. The activity is an alternative to Microfinance to achieve financial inclusion.

Under the model Business correspondents bid to offer the service and their retail outlets or sub-agents who are enrolled under the BC act as mini branches in the rural areas thereby helping the villagers to bank in their vicinity. The BC and their agents are trained in banking by the authorized bank. The concept also promotes rural entrepreneurship by employing the rural people as agents of BC.

The Central bank has informed that business correspondents appointed by bank can carry out cash transactions to customers of other banks also and this service would be brought under the core banking solution (CBS). RBI expects BC to act as catalyst to attain the target of GDP growth of 9%. RBI deputy governor commented that this can be attained by harnessing untapped resources of the bottom of the pyramid. Extending the banking service to the bottom pyramid will be the next big thing for Indian economy.

The idea seems to be attractive but also the authorities should be aware of the risk attached to outsourcing the banking services. In a country where there are always havoc on the services delivered to the low income group, the service quality delivered, the price charged for transactions etc by the BC are matters of much concern.

Hence, it is the responsibility of the authorities to ensure and supervise that the banks comply with the standards and the policies in appointing the BCs. The authorities can adopt a method to test the capability and the capacity of the BCs to deliver the quality in high standards prior to their selection. The bank should always be aware of the sensitive issues that the excluded population faces. RBI should adopt client safety measures for the rural banking who avail the services of Business Correspondents.

The BC model with no doubt will improve the quality of life style of the rural people and allow them to avail the banking products and services at an affordable price without hassles. Extending banking services will enable the economy to unlock the untapped vast potential of rural India. This is expected to succeed where microfinance failed to take off.

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