Financial Inclusion and Business Correspondents

Financial Inclusion - A Way Forward To Inclusive Development

Financial Inclusion - A Way Forward To Inclusive Development

Financial inclusion is buzz word today in Indian banking sector So what is financial inclusion and how it is important . 

Financial inclusion is the initiative of the government of India ,RBI and banks to provide basic banking services to all section of society in urban areas or rural areas at affordable cost. 

After independence most of banking was in hands of private sector ,so they only cater to the needs of rich and affluent people ,so to over come this and provide banking services to every section of society nationalization of banks was done in 1969 in which fourteen banks were nationalized and than six more banks were nationalized in 1980 but sill vast section of our society lack financial services like basic bank account ,credit facilities. 

As financially excluded people go to informal sector to meet their credit needs. They charge exorbitant rate of interest which put them in vicious cycle of moneylenders. So GOI and RBI with help of banks has initiated financial inclusion program to provide banking services to dis advantaged and ,low income groups of our society at affordable cost.

Initiatives taken by RBI and GOI towards financial inclusion:

Swabhimaan

Swabhimaan is financial inclusion scheme launched by GOI to provide banking facilities in habitation with a population in excess of 2000 by March 2012. This nationwide programme on financial inclusion, was launched in February, 2011 with its focus on bringing the deprived sections of the society in the banking network. 

Granting of new bank licenses to set up new banks

RBI has initiated a process of granting new bank licenses to open bank In this RBI has recently granted new bank licenses to two companies IDFC and Bandhan .

Making it mandatory for all banks to set up minimum 25 percent branches in rural areas.

Easing of KYC norms to open bank account

KYC  is known as Know Your Customer ,so it is mandatory for all banks to take document proof of address ,identity proof, pan no. ,so person who don’t have these documents are unable to open bank account .RBI has simplified the procedure ,a person can open small bank account by giving only aadhar card as proof .

Use of technology

Many banks has initiated steps to leverage technology to provide financial services at cheap cost. Banks on wheel is adopted by many banks to provide banking services to unbanked areas in which a mobile vehicle connected to central server via a telecommunication link provide banking services.

Banking Correspondent Model

Banking correspondent model is adopted by many banks to provide banking services where banks find it not feasible to open brick and mortar branches .In this bank appoint banking correspondent who visit particular areas on set day to provide banking services like credit ,deposit ,withdrawal.

Many initiatives has been taken by RBI ,GOI towards financial inclusion .Latest being the Pradhan Mantri Jan –Dhan Yojana (PMJDY),in which financial inclusion is taken as national mission .In this every Indian family enrolled in a bank for opening zero balance account which can be open by giving only one document either proof of address and proof of identity and also provides various different profit to account holder like insurance cover, overdraft facility ,Atm card .PMJDY is focus on opening one bank account in every family where as swabhimaan is focused on rural India.

So financial inclusion is always priority for RBI and GOI, nowadays many financial services are delivered to disadvantaged section of society in their bank accounts by DBT scheme of directly transferring subsidies in their any accounts which help in preventing leakages in delivering of subsidies to dis advantage and low income section of our society. 

Thus Financial inclusion is an enabling element, both in the fight against poverty and in reaching the goal of inclusive economic development 

Financial Inclusion and Business Correspondents

With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, RBI decided in public interest to enable banks to use the services of NGO’s / SHGs and Micro Finance Institutions (MFIs) as intermediaries in providing financial and banking services through the use of Business Facilitator and Correspondent.

Business Correspondent

Under the 'Business Correspondent' Model, NGOs/ MFIs set up under Societies/ Trust Acts, Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, In engaging such intermediaries as Business Correspondents, banks should ensure that they are well established, enjoying good reputation and having the confidence of the local people. Banks may give wide publicity in the locality about the intermediary engaged by them as Business Correspondent and take measures to avoid being misrepresented.

Roles of a Business Correspondent – 

1. Business correspondents are bank representatives.
2. They help villagers to open bank accounts.
3. They help villagers in banking transactions. (deposit money, take money out of savings account, loans etc.)
4. The Business Correspondent carries a mobile device.
5. The villager gives his thumb impression or electronic signature, and get the money.
6. Business Correspondents get commission from bank for every new account opened, every transection made via them, every loan-application processed etc.
7. The arrangements with the Business Correspondents shall specify: 
8. Suitable limits on cash holding by intermediaries as also limits on individual customer payments and receipts.
9. The requirement that the transactions are accounted for and reflected in the bank's books by end of day or next working day.
10. All agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the Business Facilitator/ Correspondent.

Redressal of Grievances in regard to services rendered by Business Facilitators/ Correspondents 

1. Banks should constitute Grievance Redressal Machinery within the bank for redressing complaints about services rendered by Business Correspondents and Facilitators and give wide publicity about it through electronic and print media. 
2. The name and contact number of designated Grievance Redressal Officer of the bank should be made known and widely publicized. The designated officer should ensure that genuine grievances of customers are redressed promptly. 
3. The grievance redressal procedure of the bank and the time frame fixed for responding to the complaints should be placed on the bank's website.
4. If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the compliant, he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his grievance/s.