Finance News

Financial inclusion: RBI ropes in private companies

Companies will now play a role in expanding the scope for financial inclusion in the country. The Reserve Bank of India (RBI) has decided to allow banks to engage companies registered under Section 25 of the Companies Act, 1956, as business correspondents (BCs).

The scope of activities to be undertaken by the BCs - a concept developed two years ago to take banking to the doorstep of all Indian households - include disbursal of small value credit, recovery of principal/ collection of interest, collection of small value deposits, sale of micro insurance, mutual fund products, pension products, other third party products and receipt and delivery of small value remittances and other payment instruments.

However, the RBI has made it clear that these companies should be stand-alone entities or companies in which NBFCs, banks, telcos and other corporate entities or their holding companies do not have equity holdings in excess of 10 per cent.

To ensure adequate supervision over the operations and activities of the BCs by banks, 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, should not exceed 15 kms in rural, semi-urban and urban areas. In metropolitan centres, it could be up to 5 kms.

However, in case a need is felt to relax 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 should also be the concerned forum for metropolitan areas.