April
24, 2008
All Scheduled Commercial Banks (including RRBs)
&
Local Area Banks
Dear Sir,
Financial
Inclusion by Extension of Banking Services – Use of Business Facilitators(BFs)
and Business Correspondents (BCs)
Please refer to our
circulars DBOD.
No.BL.BC.58/22.01.001/2005-2006 dated January 25, 2006 and DBOD.No.BL.BC.72/22.01.009/2005-2006
dated March 22, 2006 on the above subject.
2. Based
on queries received from certain banks, we had clarified that there is no objection
to banks engaging individuals as Business Facilitators (BFs) depending
on the comfort level of banks, subject to their taking adequate precautions and
conducting proper due diligence before engaging individuals as BFs.
3.
In the light of the announcement made in paragraph 92 of the Budget Speech 2008-2009
by the Hon’ble Finance Minister, Govt. of India, it has been decided to permit
banks to engage retired bank employees, ex-servicemen and retired government employees
as Business Correspondents (BCs) with immediate effect, in addition to
the entities already permitted, subject to appropriate due diligence. While appointing
such individuals as BCs, banks may ensure that these individuals are permanent
residents of the area in which they propose to operate as BCs and also institute
additional safeguards as may be considered appropriate to minimise agency risk.
4. Further, with a view to ensuring adequate supervision
over the operations and activities of the BCs by banks, it has been decided that
every BC will be attached to and be under the oversight of a specific bank branch
to be designated as the base branch. The distance between the place of business
of a BC and the base branch, ordinarily, should not exceed 15 Kms in rural, semi-urban
and urban areas. In metropolitan centres, the distance could be upto 5 kms. However,
in case a need is felt to relax the distance criterion, the matter can be referred
to the District Consultative Committee (DCC) of the district concerned for approval.
Where such relaxations cover adjoining districts, the matter may be cleared by
the State Level Bankers' Committee (SLBC), which shall also be the concerned forum
for metropolitan areas. Such requests may be considered by the DCC/SLBC on merits
in respect of under-banked areas or where the population is scattered over large
area and where the need to provide banking services is imperative but having a
branch may not be viable, keeping in view the ability of the base branch of the
bank making the request to exercise sufficient oversight on the BC.
5.
Where currently BCs are operating beyond the distance limits specified above,
DCC/SLBC may be kept informed and steps may be taken to conform to the stipulated
limits within six months time, unless specific approval is accorded by the DCC/SLBC
on the grounds indicated in paragraph 4 above.
6. Needless
to add, in the context of scaling up of BF/BC model which is a huge challenge
given the size of the country, banks should bring to the notice of RBI any important
issues to facilitate taking prompt corrective steps. The implementation of the
BF/BC model should be monitored closely by controlling authorities of banks, who
should specifically look into the functioning of BFs/BCs during the course of
their periodical visits to the branches. Further, banks should also put in place
an institutionalized system for periodically reviewing the implementation of the
BF/BC model at the Board level.
Yours
faithfully
(P.Vijaya Bhaskar)
Chief General Manager