Banking Correspondent

What is Banking Correspondent (BC)?

A Banking Correspondent (BC) is a bank's authorized representative who acts as a liaison between the bank and customers, especially in rural and remote areas where access to traditional banking services is limited. Banking correspondents play a very important role in promoting financial inclusion by extending basic banking services to underserved communities.

Role of a Banking Correspondent

1. Financial Inclusion: Enables banking services through places with scant or no existence of bank branches.
2. Service Deliverables: Enables customer transaction services through deposit, withdrawals, and inquiries about the current balance.
3. Assisting Customers: Aiding account opening, documentary support, and educating customers.

Banking Correspondent Services

• Account Opening Services: Helps one to open saving accounts under a financial inclusion policy known as PMJDY - Pradhan Mantri Jan Dhan Yojana.
• Deposits and Withdrawal: Facilitating petty banking.
• Loan Facilitation: Assists customers in applying for microloans and loan application.
• Payment Services: Collects government subsidy, pension, and wages.
• Insurance and Pensions: Sells products such as Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana.

How Banking Correspondents Work?

• Work through hand-held devices or mobile banking units
• Use biometric authentication or smart cards for secure transactions
• Connect to the bank's core system via internet or mobile networks

Eligibility to become a Banking Correspondent

• Can be individuals, NGOs, cooperative societies, or microfinance institutions that are licensed by banks.
• Should be qualified to the minimum standard required by the bank, including basic education and residency in the locality.

Advantages of Banking Correspondents

• Convenience: It brings banking services to the doorstep of people in remote areas.
• Cost Efficiency: It reduces the cost of operations for banks since it avoids the need to open physical branches.
• Financial Awareness: Educates rural communities about saving, credit, and insurance.

Problems Faced by Banking Correspondents

• Infrastructure Issues: Poor internet connectivity and power supply in rural areas.
• Low Commission: The returns may not be enough to compensate for the effort.
• Trust Issues: It is difficult to gain the trust of rural communities at first.

Importance of Banking Correspondents in India

Banking correspondents play a very crucial role in achieving the objectives of financial inclusion in India. They support initiatives like Digital India, DBT, and increasing rural credit through the expansion of banking services among the underserved population. In this way, they empower the community and spur the growth of the rural economy.