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Banking Correspondent (BC)

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Banking Correspondents (BCs) are individuals/entities engaged by a bank in India (commercial banks, Regional Rural Banks (RRBs) and Local Area Banks (LABs)) for providing banking services in unbanked / under-banked geographical territories. A banking correspondent works as an agent of the bank and substitutes for the brick and mortar branch of the bank.

BCs engage in

The banks in India may engage the following individuals/entities as BCs.

While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent and provide banking services of only one bank.

Banking correspondents were allowed by RBI vide a circular dated 25 January 2006. The concept of Banking Correspondent stemmed from a report of Shri. H R Khan, Dy Governor of RBI. Committee on Financial Inclusion Chaired by Dr. C. Rangarajan which submitted its report on 5 February 2008 had also recommended for the expansion of the BC model.

Guidelines on managing risks and code of conduct in outsourcing of financial services by banks were issued by RBI on November 3, 2006. The banks will be fully responsible for the actions of the BCs and their retail outlets / sub agents.

In order to promote financial inclusion, the Government, in October 2015, exempted services provided by a business facilitator or a business correspondent to a bank with respect to Basic Savings Bank Deposit Accounts covered by Pradhan Mantri Jan Dhan Yojana (PMJDY) by way of account opening, cash deposits, cash withdrawals, obtaining e-life certificates and Aadhar seeding in the rural area branches of banking companies, from Service Tax. The services provided by any person as an intermediary to a business facilitator or a business correspondent with respect to the above mentioned services have also been exempted from Service Tax.

Banking Correspondent in India, in all sense of the term, is equivalent to what is known as "Correspondent Banking" in Brazil (Generally, the term correspondent bank refers to a bank which functions as an agent of another bank in a foreign jurisdiction. However, Brazil uses this term for domestic agency services by individuals / entities). In some countries BC model is known as "Agent Banking".

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