2. The Reserve Bank of India has used several initiatives through the years for increasing banking outreach and ensuring greater financial addition. A significant step in this direction was the issue of RBI guidelines in January 2006 for engagement of Business Correspondents (BCs) by banking institutions for providing banking and financial services.
Since then, the regulatory framework for the BC model has been steadily honed to ensure that consumer safety is not affected while facilitating enhanced outreach of banking services. The rest in the regulatory construction was made possible due to the rapid changes in technology -both in terms of Core Banking Solution as also relatively low-cost biometric hand held devices for ensuring authenticity and scams avoidance. 3. Business Correspondents are retail agencies engaged by banks for providing bank services at locations apart from a loan provider branch/ATM.
Banks must take full responsibility for the serves of omission and payment of the BCs that they employ and have, therefore, to ensure comprehensive due diligence and additional safeguards for minimizing the agency risk. Basically, BCs allow a bank to expand its outreach and offer limited range of banking services at low cost, as setting up a brick and mortar branch may not be viable in all full cases. BCs, thus, are an integral part of a business strategy for achieving greater financial inclusion.
9. Banks were encouraged to adopt Information and Communication Technology (ICT) solutions for applying the model to ensure integrity and scams prevention. Banks should constitute Grievance Redressal Machinery within the lender for redressing complaints about services rendered by Business Correspondents and Facilitators and present wide publicity about any of it through digital and print media.
The name and contact amount of specified Grievance Redressal Officer of the bank should be producing known and broadly publicized. The specified officer should ensure that genuine grievances of customers are redressed quickly. 10. Initially, banks were not permitted to collect any charges from the customers for providing services through BC, close to the located area of the customers. Subsequently, banks were allowed in November 2009 to collect reasonable service charges from customers in a transparent manner under a Board-approved policy.
11. Although a variety of entities/ individuals have been permitted by the Reserve Bank to act as BCs, only a few have been so engaged by banking institutions actually. Out of 50 public sector and private sector banks, only 27 banks have so far reported engaging BCs. Most of the banks that have engaged BCs have appointed Section 25 companies/ Trusts/ Societies as BCs. 12. While many banks have taken some steps to adopt the BC model, only a few of these have scaled-up beyond the pilot stage.
13. The limited access to financial services in most developing countries is a real concern for the nationwide government authorities and their central banking institutions. Over the recent years, several initiatives have been used for financial inclusion of the public by extending the formal financial services through banks and their creators.
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Branchless bank has emerged as an alternative to the offline branches to attain away to the unbanked areas. This has been possible credited to changes in the legislative and regulatory framework for the provision of financial/ banking services backed by appropriate technology solutions. In countries like, Brazil, Kenya, Mexico, Philippines, South Africa, etc banks have been allowed to engage real estate agents for rendering limited financial services. 14. The number of services and the entities allowed to be appointed as real estate agents change from country to country.
In Brazil, banks are permitted to provide services such as debris, transfers, and withdrawals; forwarding applications for account opening, loans; loan collection, etc through legal entities working as agents. Year Until last authorizations were required to be obtained by the banking institutions from the Central Bank of Brazil for interesting agents.
The Central Bank of Brazil does not need to authorize brokers any more. The Central Bank of Kenya has issued guidelines to banks on agent banking under which limited responsibility companies are permitted to act as agents among other, but NGOs and not-for-profit are not allowed to act as realtors. The South African regulatory framework gives wide discretion to banks to use non-bank third parties to offer banking services beyond their traditional branch network, either as agents or through outsourcing arrangements. The banks in other jurisdiction like Mexico and Philippines are permitted to outsource certain bank services also.