The Hindu Business Line : Business correspondents

The decision to outsource lending and deposit collection activities would help banks reach remote areas where they were not able to establish branches.

But there are certain issues that require serious attention.

First, the selection of these business correspondents such as micro finance agencies and other NGOs should be done in a judicious way, keeping the political and communal organisations at bay.

The commission amounts fixed should be meticulously implemented to avoid any corrupt practices and should be directly paid by the banks.

Another important possible outcome of the decision is that at least some banks may consider using this opportunity to close down the branches in remote areas that are not profitable.

As the customers in such areas could be served through the correspondents, banks can justify their action.

In the event of rising competitive trends in the banking sector, such outsourcing attempts can boost the banking habits of the people at large, whereas the banks can concentrate more on the present branches and extend the service areas through the agents, provided the system is kept under surveillance by the regulatory agencies.

C. P. Velayudhan Nair

Kochi

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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