Mumbai, Jun 25 (KNN)  In a move that will accelerate the flow of credit to those at the bottom of the pyramid, the Reserve Bank of India (RBI) has relaxed the rules for non-banking financial corporations (NBFCs) that do not collect public deposits to be appointed as business correspondents (BCs) by banks, subject to certain conditions.

“It should be ensured that there is no comingling of bank funds and those of the NBFC-ND appointed as BC,” RBI said in a notification yesterday.

Further, “there should be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of.”
In addition, “banks should ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own customers and forced bundling of services offered by the NBFC-ND and the bank does not take place,” it said.

The apex bank in the first Bi-monthly Monetary Policy Statement, 2014-15 announced on April 1, 2014 stated that it was considering possible inclusion of new entities as BCs.
Taking into account the recommendations of the Mor Committee, the existing guidelines on appointment of Business Correspondents (BCs) were reviewed before the rules were relaxed for appointing NBFCs to act as agents of banks.

Moreover, with a view to providing operational flexibility to banks and in view of the technological developments in the banking sector, the RBI has decided to remove the stipulation regarding distance criteria. The banks should, however, while formulating the Board approved policy for engaging BCs, keep in mind the objectives of adequate oversight of the BCs as well as provision of services to customers while deciding how to modify extant distance criteria.

“Banks may continue to take measures to address possible reputational risks arising out of appointment and functioning of BCs,” it said.  (KNN/ES)