Reserve Bank of India allows companies to act as business correspondents for profit

The Reserve Bank of India (RBI) has decided to permit banks to engage companies excluding non-banking financial companies to act as business correspondents (BCs) for the purpose of financial inclusion. These companies will be in addition to the individuals/ entities permitted earlier by the central bank and would be working as BCs for profit, an RBI notification said on Tuesday.

Last month, the RBI had issued a discussion paper on engagement of “for profit” companies as BCs and had asked for feedback.

BCs are retail agents engaged by banks for providing banking services at locations other than bank branches or automated teller machines.

Besides the above entities, retired bank employees, retired teachers, owners of kirana stores, retired government employees and ex-servicemen, medical, fair price shops and individual public call office operators, among others, are permitted to work as BCs.

RBI said the benefit of appointing corporates with a large and widespread retail network is that they would bring in larger resources, higher organisational strength and the financial backing needed for a large network of BCs, besides providing financial security to the bank.

“The move to allow for-profit companies with a widespread retail network to act as business correspondents is a path-breaking and welcome development,” Chanda Kochhar, managing director and chief executive officer, ICICI Bank said.