If all goes to plan, rural kirana shops, medical stores, fair price shop owners, individual public call office (PCO) operators or petrol pump owners could well become the face of banking in remote areas.
The Reserve Bank of India (RBI) on Monday said it has decided to allow banks to appoint such individuals as their “business correspondents” or persons empowered by the banks to officially represent them to carry out a host of banking activities.
The scope of activities to be undertaken by the business correspondents will include disbursal of small loans, recovery of principal amount of outstanding loans, collection of interest, collection of small value deposits and sale of micro insurance, mutual fund and pension products, among others.
Agents of small savings schemes of government and retired teachers can also be engaged as business correspondents.
“Banks (are) to implement the business correspondent model to achieve greater penetration of banking services,” RBI said.
An RBI working group, which had recommended a series of measures to expand banking services in rural and remote areas, had said that the business correspondent model has the potential to speed up the process of financial inclusion in the country.
“Keeping in view the operational and other risks implied, banks are advised to ensure that they carry out suitable due diligence in respect of the entities proposed to be appointed as business correspondents,” an RBI notification issued on Monday said.