Ease biz correspondent norms: Private banks

Private sector banks have sought relaxation in the present norm that limits the deployment of business correspondents within 15 km range of a branch to give them flexibility in operations to meet the target for financial inclusion.

The original intention of the 15-km restriction was to ensure timely service to customers, especially in the rural areas. But now, new generation private banks do not have an extensive branch network in semi-urban and rural areas. Thus, it has become difficult for them to reach targets, a senior Reserve Bank of India (RBI) official said.

The banks have sought exemption citing strong information technology backbone to ensure effective service delivery to customers beyond the 15-km limit. Axis Bank is said to have sought an exemption from this for its branches in Nasik district of Maharashtra.

ICICI Bank has also sought similar relaxation for operations in Mumbai. “The decision on such requests is usually taken at district-level bankers committees. The matter may also come up for discussion at the state-level banker’s panel for Maharashtra, which is meeting in Pune tomorrow, the official said.

Besides reviewing the performance of banks in the priority sector areas, the panel will also seek to address the issues of small and medium enterprises (SMEs), who will make presentations. These units are facing cash flow problems and demand downturn.

RBI is monitoring the disbursement of payments by companies to SMEs. A sublimit has been made out of the working capital facility to SMEs which render service or supply products. Banks were already asked to submit the status as on December 2008. It will take a month to get a clear picture on the issue, he said.

In the current environment marked by demand slowdown and credit crunch, SMEs are experiencing delay in payment by large companies.