Financial Daily from THE HINDU group of publications
Friday, Jan 27, 2006
Financial Daily from THE HINDU group of publications Friday, Jan 27, 2006 |
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Banking Money & Banking - Financial Policy RBI gives nod for appointment of `Business Correspondents' — Banks can now offer loans, accept deposits thru agents Our Bureau
Mumbai , Jan. 26 BANKS are now allowed to outsource lending and deposit-taking activities to enable them to reach rural and remote areas. In other words, banks can now collect deposits from public and deliver credit to borrowers through agents appointed by them. The Reserve Bank of India has permitted banks to appoint NGOs, micro finance agencies, post offices and NBFCs (not accepting deposits) to act as banks' Business Correspondents. To begin with, these outside agencies are allowed to disburse `small-value credit', collection of `small-value deposits', recovery of principal and interest and sale of mutual funds and pension products. In a circular issued to banks on January 25, the RBI has permitted them to appoint business correspondents for undertaking such activities under a scheme. Under the scheme, banks should enter into specific arrangements with business correspondents prescribing suitable limits on cash holding by business correspondents and also limits on individual customer payments and receipts. The transactions done through business correspondents are accounted for and reflected in the bank's book of accounts by the end of the day or the next working day. Any agreements entered into by the correspondents with the customer shall specify that the bank is responsible to the customer for the acts of omission and commission of the correspondent, the circular said. "The activities undertaken by the business correspondents would be within the normal course of the bank's banking business, but conducted at places other than the bank premises," the circular said. The business correspondents will be paid commission/fees as per RBI guidelines. Banks should follow know-your customer norms while undertaking banking activities through the business correspondents, the RBI said in its circular. The RBI has already allowed banks to engage NGOs, micro finance agencies and other self-help groups for identification of borrowers, processing of loan applications, helping recovery and such other support services.
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