RBI allows banks to appoint non-deposit taking NBFCs as business correspondents

Banks have to ensure that there is no comingling of bank funds and those of the NBFC-ND appointed as BC

Taking into account the recommendations of the Mor Committee, the existing guidelines on appointment of Business Correspondents (BCs) have been reviewed allowing banks to appoint non-deposit taking NBFCs (NBFCs-ND) as BCs. However, the banks have to ensure that there is no comingling of bank funds and those of the NBFC-ND appointed as BC, while there has to be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of.

Banks should ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own customers and forced bundling of services offered by the NBFC-ND and the bank does not take place.

With a view to ensuring adequate supervision over the operations and activities of the retail outlet/sub-agent of BCs by banks, every retail outlet/sub-agent of BC is required to be attached to and be under the oversight of a specific bank branch designated as the base branch.

The distance between the place of business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centres.

In case there is a need to relax the distance criterion, the District Consultative Committee (DCC)/State level Bankers Committee (SLBC) could consider and approve relaxation on merits in respect of under-banked areas etc.

Powered by Capital Market - Live News