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Business Correspondent. Nupur Jha & Subit Saurav. 01 April 2013. Overview. Current Statistics Reasons for Financial Exclusion Regulatory Mandate KGFS viz -a- viz Traditional BC Existing Partnership Arrangement Win-win scenario. Current Statistics- Banking Scenario.

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Business correspondent

Business Correspondent

Nupur Jha & Subit Saurav

01 April 2013


Overview

Overview

  • Current Statistics

  • Reasons for Financial Exclusion

  • Regulatory Mandate

  • KGFS viz-a-viz Traditional BC

  • Existing Partnership Arrangement

  • Win-win scenario


Current statistics banking scenario

Current Statistics- Banking Scenario

  • Excluded from the ambit of banking services - approximately 145 million

  • Only 55 per cent of people have bank accounts

  • Only 9 per cent have borrowings from the banks

    • 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

  • 95 per cent have no general insurance

  • 98 per cent of population does not participate in the capital market

  • 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


Reasons for financial exclusion

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


Regulatory mandate

Regulatory Mandate

  • Financial Inclusion

  • Priority Sector Lending

    • Domestic Banks – 40%

    • Foreign Banks – increased to 40%

  • 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

Key Components of the Regulatory Framework under BC


Kgfs viz a viz a traditional bc

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


Existing partnership arrangement

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

  • BC Branch 1

  • BC Branch 6

  • BC Branch 2

  • Village 1

  • The Bank

  • (Tier 5|6 Location)

  • 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

  • Village 2

  • BC Branch 3

  • BC Branch 5

  • BC Branch (Tier 6 locations*)

  • BC Branch 4

  • Village 3

  • Village 5

  • Village 4


Win win scenario

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


Business correspondent model

Business Correspondent Model

A major enabler of financial inclusion

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.


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