Mumbai, June 24: The Reserve Bank of India today allowed non-banking finance companies (NBFCs) to serve as business correspondents.
However, commercial banks can only appoint non-deposit taking NBFCs as correspondents.
In 2006, the apex bank had started the system of correspondents to ensure greater financial inclusion. These third-party entities are engaged in the collection of deposits and disbursal of credit.
Since then, the RBI has been expanding the list of entities that can qualify as correspondents.
At present, retired bank employees, teachers, government employees, ex-servicemen, individual owners of kirana/medical shops, public call office operators, agents of government’s small savings schemes and authorised functionaries of self-help groups, NGOs/ MFIs can serve as correspondents.
In a notification today, the RBI said taking into account the recommendations of the Nachiket Mor committee on accelerating the flow of credit to those at the bottom of the pyramid and enlargement of catchment area of the business correspondents, including through the possible inclusion of new entities, it is allowing non-deposit taking NBFCs (NBFC-ND) to be appointed as correspondents.
However, the central bank stipulated that there should be no “comingling of bank funds and those of the NBFC-ND appointed as BC’’.
There should be a specific contractual arrangement between the bank and the NBFC to ensure that all possible conflicts of interest are taken care of.
Moreover, banks have been told that the NBFC should not adopt any restrictive practice that include offering savings or remittance functions only to its own customers.