Business Correspondent
Nupur Jha & Subit Saurav
01 April 2013
1
Overview
• Current Statistics
• Reasons for Financial Exclusion
• Regulatory Mandate
• KGFS viz-a-viz Traditional BC
• Existing Partnership Arrangement
• Win-win scenario
2
Current Statistics- Banking Scenario
1.
Excluded from the ambit of banking services - approximately 145
million
2.
Only 55 per cent of people have bank accounts
3.
Only 9 per cent have borrowings from the banks
–
4.
with only one bank branch servicing per 14,000 people
More than 80 per cent of the population do not have access to credit or
life insurance cover
5.
95 per cent have no general insurance
6.
98 per cent of population does not participate in the capital market
7.
On an average, there is one bank branch for every 19 villages
•
•
http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/FIC060911DG.pdf
http://dqindia.ciol.com/content/top_stories/2012/112011804.asp
3
Reasons for Financial Exclusion
•
Poor infrastructural set up
•
High cost of operations
•
Lower transaction volumes
•
Lack of viable innovative operating models
•
Unfamiliar market
•
Inability to correctly assess risks
4
Regulatory Mandate
• Financial Inclusion
• Priority Sector Lending
– Domestic Banks – 40%
– Foreign Banks – increased to 40%
Key Components of the Regulatory Framework under BC
• Service Area
– BC’s can service clients only within a 30 km radius from the Bank's branch and
in case of urban areas the radius should not be more than 10 km
• Transaction Records
– All transactions undertaken through BC’s must be recorded in the books of the
Bank by the end of working day
• KYC Norms
– Know Your Customer (KYC) norms must be observed by the promoting Banks for
all BC clients
5
KGFS viz-a-viz a Traditional BC
•
Multiple Product Offering - including asset products
•
Brick and mortar branch structure – physical branch
•
Robust enrolment process – building customer database
•
Seamless technology integration – enables real time transaction
•
Knowledge management and in depth training procedure
•
Know Your Customer( KYC ) process
•
Wealth Management Approach - customer centric
•
Credit Appraisal Process
•
Portfolio performance monitoring expertise
•
Risk sharing in between the BC and the Bank
6
Existing Partnership Arrangement
•
•
Under the Direct Origination Model IRCS shall set up branches under the
KGFS model that would serve as BC to the partner Bank
The BC branches can deliver all the products of the Bank, including
savings, deposits, payment services and loans to the remote rural
customer household
KGFS Branch Location Criteria
•
No private sector Bank branch in a 5
km radius
•
No more than one state owned Bank
branch in the service area
•
•
A population of 10,000 within a 3km
radius of the location, with each
village in the service area not
exceeding a population of 4,000
A minimum distance of 5km from the
block headquarters
BC
Branch
1
BC
Branch
6
BC
Branch
2
Village
1
The Bank
(Tier 5|6
Location)
Village
2
BC
Branch
3
BC
Branch
5
BC
Branch
4
BC Branch
(Tier 6
locations*)
Village
3
Village
5
Village
4
7
Win-win scenario
• Banks
–
–
–
–
100% PSL portfolio
Tier 5/6 market penetration – Greater reach
Better loan performance
Quick expansion – to bottom of pyramid
• Financial Institutions (BC)
– Regular fund inflow
– No exposure to interest rate risk
– Low capital requirement
• KGFS
– Full suite of financial products including Savings Account, RD and FD
8
Thank you
IFMR Rural Channels and Services Private Limited
IITM Research Park | A1 | 10th Floor | Kanagam Village | Taramani | Chennai – 600 113 | Tamil Nadu | India
http://ruralchannels.ifmr.co.in/
9
Business Correspondent Model
A major enabler of financial inclusion
160
140
120
100
80
60
40
20
0
FY 10
FY 11
FY 12
No. of Rural Branches
Banking outlets through BCs
Banking outlets through other models
Total No. of Branches
Q2 13
Source: Financial Inclusion – Issues in Measurement and Analysis - Keynote Address by Dr. K. C. Chakrabarty, Deputy
Governor, Reserve Bank of India at the BIS-BNM Workshop on Financial Inclusion Indicators at Kuala Lumpur on
November 5, 2012.
10