RBI proposes two categories for banking correspondents under new draft guidelines

The Reserve Bank of India (RBI) on April 6 released draft norms on branch authorisation, under which it has proposed banking correspondents be classified into two categories - Business Correspondent-Banking Outlets and Business Correspondent-Banking Touchpoints.

At the same time, it has proposed doing away with the Business Facilitator model as the RBI said it undertakes functions similar to that of BC. 

"The Draft Amendment Directions propose to (i) define three types of delivery points viz. branch, Business Correspondent- Banking Outlet (BC-BO) and Business Correspondent- Banking Touchpoint (BC-BT) (ii) simplify the eligibility criteria for engaging the BCs (iii) subsume Business Facilitator (BFs) under BC model (iv) bring uniformity in the BC ecosystem in respect of payment of commission/ remuneration," the central bank said in its draft amendment directions. 

As per the draft directions, all existing banking outlets manned by BCs shall be classified as BC-BO or BC-BT by September 30, 2026. 

The guidelines on branch authorisation as applicable to domestic scheduled commercial banks shall also be applicable to subsidiary of foreign banks, Reserve Bank said. 

BC-BOs will be able to carry out wide range of activities such as opening of bank accounts; opening of term deposit accounts; cash deposits and withdrawals; fund transfers; issuance/ blocking of debit cards among many others. 

On the other hand, BC-BT shall be only able to provide limited inter-operable services of small-value cash transactions and remittances, up to a threshold as per bank’s policy.

The draft also lays down stringent due diligence norms for individuals or entities to be engaged as BCs. These norms will cover aspects such as reputation or market standing, financial soundness, management and corporate governance, cash handling ability and ability to implement technology solutions in rendering financial services.

Notably, banks shall take all measures to protect the interests of the customer, RBI said. 

For instance, the BC or its sub-agents will have to be personally introduced to the members of public so that there is no misrepresentation or impersonation and the products and processes will have to be approved by the bank and no product will be introduced by the BC without the approval of the bank.