The Reserve Bank of India (RBI) said that banks must review the operations of BCs (business correspondents) at least once every six months with a view to ensuring that requirement of prefunding of Corporate BCs and BC Agents should progressively taper down with the passage of time.
Ideally in all normal cases the prefunding should progressively come down in such a manner so as to reach around 15% of the limits fixed for each BC/CSP in case of deposits and 30% in case of Bank Guarantees, etc. in say 2 years from the time a BC starts operations, the RBI said in a notification on Tuesday.
The Board should also review the position of payment of remuneration of BCs and should also lay down a system of monitoring by the top management of the Bank. The issue of allowing BCs to handle deposit and payment transactions of various credits, remittance, overdraft and other products of banks must also be examined by the Board from time to time. Complaints redressal system in this regard should also be laid down by the Board.
As the cash handled by BCs is Bank’s cash, the responsibility for insuring this cash should rest with the banks.
After opening of large number of banking outlets in the last three years in unbanked areas of the country through the BC (Business Correspondent)-ICT model, the time has come to monitor the usage in terms of transactions per BC so as to ensure sustainability of the BC model.
The insistence by banks on BCs to fully prefund their accounts even after considerably long business relationship has become a major impediment in scaling up operations of BCs. Similarly, low/delayed payment of remuneration of BCs and passing on the responsibility of insuring cash to BCs have also been proving to be irritants in increasing the usage in large number of bank accounts opened. It is, therefore, important for banks to recognize that cash handled by BCs, while doing banking business on behalf of the Bank, is Bank's Cash.