RBI asks banks to stop insisting BCs on prefunding of their accounts
Updated: Apr 23, 2014 11:17:22am
Mumbai, Apr 23 (KNN) In order to easily reach out to the customers in ‘hitherto unbanked areas of the country’ through the Business Correspondents (BCs), the Reserve Bank has asked banks to stop insisting on their 'pre-funding' of the accounts through which they conduct transactions for unbanked customers.
BCs are entities which help bridge the missing link between banks and unbanked customers in rural areas and slums.
“...the time has come to monitor the usage in terms of transactions per BC so as to ensure sustainability of the BC model. One of the critical issues identified in this regard has been of Cash Management of BCs,” RBI said.
The insistence by banks on BCs to fully prefund their accounts even after a considerably long business relationship has become a major impediment in scaling up operations of BCs, it added.
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,” the apex bank said in its letter to the banks.
According to the RBI, the boards of banks "must review the operations of BCs 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 per cent of the limits fixed for each BC/CSP in case of deposits and 30 per cent in case of bank guarantees."
Further, bank boards should take the responsibility on the amount of leeway given to BCs.
"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," RBI said. (KNN/SD)
BCs are entities which help bridge the missing link between banks and unbanked customers in rural areas and slums.
“...the time has come to monitor the usage in terms of transactions per BC so as to ensure sustainability of the BC model. One of the critical issues identified in this regard has been of Cash Management of BCs,” RBI said.
The insistence by banks on BCs to fully prefund their accounts even after a considerably long business relationship has become a major impediment in scaling up operations of BCs, it added.
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,” the apex bank said in its letter to the banks.
According to the RBI, the boards of banks "must review the operations of BCs 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 per cent of the limits fixed for each BC/CSP in case of deposits and 30 per cent in case of bank guarantees."
Further, bank boards should take the responsibility on the amount of leeway given to BCs.
"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," RBI said. (KNN/SD)
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