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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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