Features and Merits of the BC Model of Banking

Features and Merits of the BC Model of Banking

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Financial services are offered by banks through a variety of channels: The traditional channels include ATMs, bank branches, and online banking. The BC or, the Business Correspondent option gives banks a new way to provide services. The guidelines are written in such a way that a bank has to be involved and is the ultimate service provider. The principal banks are accountable for the actions of their correspondents, but the RBI has oversight and regulatory responsibility for the BC Banking channel as part of its regulatory regime.

The Banks will be able to effectively reach the unreached population at large, including customers and intermediaries, through the BC/BF model. In this model, banks don't have to spend money on branch infrastructure to get to unbanked areas, and people who haven't been banked before will still have easy access to financial products and services. This would necessitate a substantial quantity of BC/BF, who aren’t employees but outsourced by the banks all across the country to operate as their representatives or, proxies. The previously "excluded" rural poor will be brought in, a more open, inclusive, and egalitarian society will be established in the rural areas, and financial inclusion will become a reality within a short period of time.

Advantages of using BC or BF - According to various banks, the following are some of the advantages of using BC:

• A better option than bank branches: A typical rural bank can serve 3,000-4,000 families in 12-15 villages within a 15-kilometer radius. In unbanked areas of India, a Public Sector Bank branch may need more than five years to break even, whereas a private sector and foreign bank with IT connectivity may need about five times as long. In addition, the procedure for obtaining permission to open a branch is lengthy and time-consuming. Banks might be able to get in touch with customers much faster and for less money with the BC option.

• Reaching the unbanked: Since the majority of BC beneficiaries are located in underbanked and unbanked areas, the model enables banks to provide financial services to unbanked customers outside of their branch network.

• Doorstep banking—disbursement and loan recovery at the beneficiary's doorstep

• Better quality of assets: Because target customers are well-known to local NGOs, Post Offices, BDO, and other social bodies, loan facilitation by the NGOs/BC (the groups' promoters and builders) improves the quality of assets. This model can be scaled up in a short amount of time.