New Delhi: The Reserve Bank of India (RBI) has in principle agreed to permit interoperability of business correspondents (BCs), aimed at helping customers in rural areas access banking services such as cash deposits, withdrawals, remittances and balance enquiries from anywhere in the country on the lines of ATM facilities available to customers in urban areas.
Interoperability will allow BCs of one bank to service customers of other banks as well, a move that will help segments such as migrant labourers access banking services from anywhere in the country and in the process encouraging greater financial inclusion.
The banking regulator is expected to issue guidelines soon, said two people familiar with the development.
RBI permitted banks to use the services of intermediaries such as business facilitators and correspondents to provide banking services for ensuring greater financial inclusion and increasing the outreach of the banking sector. BCs serviced 76,801 villages and 3,653 urban locations as of end-March, RBI data shows.
The central bank “will issue the guidelines shortly”, said a senior finance ministry official, who did not want to be named, confirming the development.
As part of its financial inclusion drive, the ministry has been pushing for interoperability to increase the reach of BCs. Interoperability will be primarily aimed at no-frills accounts as other customers are already connected through ATMs.
A questionnaire emailed to the RBI spokesperson remained unanswered.
Extending reach: A labourer (right) in a Haryana village accesses banking services with the help of a business correspondent. Ronjoy Gogoi/Hindustan Times
“A customer who is being serviced by the BC of one bank can go to the BC of another and perform all transactional services such as cash deposit and withdrawal, and remittances,” said A.P. Hota, managing director and chief executive of National Payments Corporation of India (NPCI), explaining how the process will help customers. “It’ll be like customers going to an ATM of another bank.”
NPCI was set up by banks in 2008 to build a nationwide payment platform and links up India’s ATMs.
Once interoperability is allowed, a customer can approach any BC with the smart card that holds demographic and account details. The BC, with the help of a hand-held device—a micro ATM—will verify the information about the customer with his or her bank. “The verification will be either through a PIN or through biometrics.”
A BC can currently work for only one bank in a particular area and cannot undertake transactions for customers of other banks, said Rishi Gupta, chief financial officer of Financial Inclusion Network and Operations Ltd (FINO). “Interoperability does not entail technology alone. There is a question of how the settlements will take place.”
FINO was set up by banks in 2006 to enable financial inclusion through the use of technology.
The Reserve Bank has agreed to permit interoperability of banking correspondents. Mint’s Remya Nair tells us how the move, modeled on the lines of ATMS, could create greater accessibility
The banks will have to be part of the core banking solution and NPCI will host the central infrastructure.
“NPCI already connects ATMs of all banks,” Hota said. “So only regulatory approvals are required now for interoperability to become a reality.”
Even if RBI permits interoperability, BCs feel that it will take some time for the changes to take effect.
“For interoperability to work, banks will have to make a lot of investment in upgrading their information technology infrastructure. Most banks don’t have no-frills accounts on the core banking platform as security requirements are stringent,” said Anirban Roy, founder member and managing director of SEED Financial Services, a BC.
According to Gupta, interoperability may not be a sustainable business model. “At a time when there are still vast geographies where customers don’t have access to any banking facilities, it is not feasible for a few business correspondents to service the same set of customers,” he added.