Source: BS
Context:
The Reserve Bank of India (RBI) is considering a licensing framework for corporate Business Correspondents (BCs). This would bring fintech firms operating as corporate BCs under direct RBI regulation, instead of the current model where sponsor banks bear responsibility for BC actions.
Who are Business Correspondents?
Business Correspondents (BCs) are agents appointed by banks to deliver basic banking and financial services at the grassroots level, especially in rural, remote, and underserved areas, where setting up brick-and-mortar branches is not viable. They act as the last-mile interface between banks and customers.
Who Regulates BCs?
- Regulated indirectly by the Reserve Bank of India (RBI)
- Banks are fully responsible for the actions of BCs they appoint
- BCs themselves are not directly licensed by RBI (as of now)
Who Can Act as BCs?
- Individuals (kirana shop owners, retired teachers, ex-servicemen, SHG members)
- NGOs, MFIs
- Companies and fintech firms (as Corporate BCs)
Services Provided by BCs
- Opening Basic Savings Bank Deposit Accounts (BSBDA)
- Cash deposit and withdrawal
- Aadhaar-enabled payment services (AePS)
- Direct Benefit Transfer (DBT) disbursement
- Utility bill payments and remittances
- Micro-insurance and pension enrolment (PMJJBY, PMSBY, APY)
Current Regulatory Arrangement
- Corporate BCs (many are fintechs) are not licensed by RBI
- Partner/sponsor banks are held accountable for BC conduct
- Some fintechs hold separate licences for limited functions:
- Prepaid Payment Instruments (PPI)
- Payment Aggregators (PA)
This fragmented oversight has created regulatory gaps.
