Tenets and Merits of the BC Model of Banking

Tenets and Merits of the BC Model of Banking

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Establishing traditional bank branches everywhere is not an option in this day and age of increased competition, slim profit margins, and tight budgets. It is, in this manner, basic to investigate the conceivable outcomes of other savvy conveyance systems to connect with far off areas and fulfill the monetary necessities of customers at a reasonable expense. This is the goal behind the introduction of Business Correspondent (BC) in the banking industry. The Government of India's Financial Inclusion program can be effectively implemented using this tool. There are two different types of Business Correspondents Models used by banks to provide various types of financial services:

1. Individual (Financial Inclusion) for Business Correspondents to provide comprehensive financial services to the masses of the financially disadvantaged in all villages and locations that are not banked.

2. Non-individual (asset-based) business correspondents for the purpose of providing priority sector lending in the agricultural sector.

Benefits of the BC model

• Contributes to the improvement of banks' asset quality: Personnel who are already familiar with the area's geography, people (having a personal connection with them), financial situation, and intentions or capacity to repay are the selected Business Correspondents. Because of this, the quality of the assets improves because they can help banks collect loan and other installment amounts on time.

• Increases the number of customers by addressing the underbanked: By establishing their presence in remote areas through BCs and agents (or agencies), the BC model enables banks to reach populations that have remained outside of their network.

• Makes the idea of doorstep banking more popular: Doorstep banking is a great way to reach out to the rural and semi-urban population and meet their regular, basic financial needs in a safe and secure way because today's generation is used to being able to bank on the go.

• An alternate to traditional bank locations: In villages and rural areas, it may take years to reach a break-even point, and establishing banking infrastructure in banks is not only expensive. BC model works like a bank office through its delegates, broadening all conceivable money related administrations, without the requirement for actual branches, a financial staff to work in them and furthermore the working foundation.