Why does bcs exist

The relaxation in the regulatory framework 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 fraud prevention.

The circulars issued by the Reserve Bank on the subject are listed at the end of this paper Annex- 3. 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.

Basically, BCs enable 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 cases. BCs, thus, are an integral part of a business strategy for achieving greater financial inclusion. The Committee on financial inclusion Chairman: Dr. Rangarajan observed that with increasing competition, banks are getting to be quite wary of the reducing margins available to them on financial intermediation and that small value clients depositors in remote locations get very little preference in accessing financial services.

Emphasizing the need for having a BC touch-point in each of the 6 lakh plus villages in the country, the Committee recommended individuals like locally settled retired Government servants like postmasters, school teachers, ex-servicemen etc may also be permitted to act as BCs. The Committee also recognized that technology has to be an integral part in sustaining outreach efforts through the BC model. Extract of recommendations of the Committee furnished in Annex - 2.

With a view to ensuring adequate supervision over the operations and activities of the BCs by banks, every BC is required to be attached to and be under the oversight of a specific bank branch designated as the base branch. This guideline was issued in April along with the stipulation that 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 and 5 kms in metropolitan centers.

Subsequently, the maximum distance criterion in respect of rural, semi-urban and urban areas was raised from 15 kms to 30 kms. Banks were encouraged to adopt Information and Communication Technology ICT solutions for implementing the model to ensure integrity and fraud prevention. Banks are also required to ensure that their arrangements with BCs should specify suitable limits on cash holding by intermediaries as also limits on individual customer payments and receipts; it should also specify that the transactions are accounted for and reflected in the bank's books by end of day or next working day.

The banks may, if necessary, use the services of the BC for preliminary work relating to account opening formalities. Banks are required to comply with the RBI guidelines on managing risks and code of conduct in outsourcing of financial services. Banks should constitute Grievance Redressal Machinery within the bank for redressing complaints about services rendered by Business Correspondents and Facilitators and give wide publicity about it through electronic and print media.

The name and contact number of designated Grievance Redressal Officer of the bank should be made known and widely publicised. The designated officer should ensure that genuine grievances of customers are redressed promptly. Initially, banks were not allowed to collect any charges from the customers for providing services through BC, close to the location of the customers. Subsequently, banks were allowed in November to collect reasonable service charges from customers in a transparent manner under a Board-approved policy.

Out of 50 public sector and private sector banks, only 27 banks have so far reported engaging BCs. Further, almost all the Section 25 companies engaged as BCs have been floated by the technology service providers who had provided the smart card or biometric solutions for account openings, etc. FINO a technology firm working together with its non-profit partner Fintech Foundation, which acts as BC network manager has opened about 10 million accounts on behalf of 14 banks, Post Offices and nine Government agencies.

Similarly, Integra Micro Systems Pvt. Ltd, has also provided technology solution under the BC model to a few banks. While many banks have taken some steps to adopt the BC model, only a few of them have scaled-up beyond the pilot stage.

The difficulty experienced by banks in scaling up have been attributed to several factors including credit, operational, legal and reputation risks faced by banks in engaging a large number of BCs, low coverage by individuals acting as BCs due to their financial and other constraints, difficulty in assessing integrity of individuals acting as BCs, general lack of professionalism of BCs in matters of regularity, punctuality, maintenance of various records, delays in loan processing, disbursements, low volume of business generated by BCs and costs associated with low volume small value transactions.

The limited access to financial services in most developing countries has been a real concern for the national governments and their central banks.

Over the recent years, several initiatives have been taken for financial inclusion of the masses by extending the formal financial services through banks and their agents. Branchless banking has emerged as an alternative to the brick and mortar branches to reach out to the unbanked areas.

In countries like, Brazil, Kenya, Mexico, Philippines, South Africa, etc banks have been permitted to engage agents for rendering limited financial services. The range of services and the entities permitted to be appointed as agents vary from country to country. In Brazil, banks are permitted to offer services such as deposits, withdrawals and transfers; forwarding applications for account opening, loans; loan collection, etc through legal entities functioning as agents.

Until last year, authorizations were required to be obtained by the banks from the Central Bank of Brazil for engaging agents. The Central Bank of Brazil does not need to authorize agents any more. The Central Bank of Kenya has issued guidelines to banks on agent banking under which limited liability companies are permitted to act as agents amongst other, but not-for-profit and NGOs are not permitted to act as agents.

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 also are permitted to outsource certain banking services. Details of the legal framework for branchless banking in these countries are given in Annex 1.

Achieving the objective of financial inclusion requires a combination of organisational innovation and technology application. Many of the ingredients for this are in place, including the requirement that individual banks articulate their strategy for achieving the objective.

However, it is clear that financial inclusion initiatives will be unsustainable unless it is commercially viable for all stakeholders — banks themselves and the entities they use as BCs to increase penetration. The diversity of conditions across the country makes it difficult to visualize a single approach to ensure viability. General regulatory principles would have to combine with adequate flexibilities to allow viable models to emerge in each region.

In this context, the suggestion from some quarters is to allow banks to use corporates, including telecom companies, NBFCs etc as BCs. The BC model may evolve into two distinct patterns, viz. Under both models banks have to be responsible for all acts of the retail agent as it is the point of contact for the customer where banking transactions take place. The pros and cons of appointing corporate as BCs are examined below:.

Corporates with large and widespread retail network bring in larger resources, higher organizational strength and financial backing needed for a large network of BCs besides providing financial security to the bank. These outlets are already dealing with the local population and are familiar with them.

The shopkeepers and other retail agents of the large corporates may be more comfortable dealing with the company that they are already used to and familiar with, rather than with the bank. Failure of large companies as BCs would mean a reputation risk to the company and endanger its substantive business. As such, the companies could be relied upon to ensure that their agents do not jeopardize their reputation.

A corporate is likely to continue as BC for a longer period than individuals, thus ensuring continuity of services. It exists because these bowls are "ratings winners. Read between the lines. It exists so that a BCS conference team, like Florida, Texas, Alabama, or any other team from the Big Six, won't have as much of a chance to be embarrassed on the big stage like Alabama was by Utah last year, Oklahoma was by Boise State in , or Pittsburgh by Utah in It was one of the best of the decade and contained, in my opinion, the most memorable finish of the decade.

And, thanks to Utah twice and Boise's wins over Big Six teams in the last six years, this is why, according to the BCS, we can no longer have nice things. You really screwed it up this time. Resume Subscription We are delighted that you'd like to resume your subscription. Please click confirm to resume now. Sponsored Offers.

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