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4) What do you understand by Banking correspondents? Highlight the advantages of Business/Banking correspondents with special reference to the role they can play in meeting the goal of financial inclusion. Also Discuss the issues being faced by them in the realization of financial inclusion. (250 words)

Topic:  Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

4) What do you understand by Banking correspondents? Highlight the advantages of Business/Banking correspondents with special reference to the role they can play in meeting the goal of financial inclusion. Also Discuss the issues being faced by them in the realization of financial inclusion. (250 words)

Indianexpress

Why this question:

The Article highlights that the Business correspondents (BCs) operating in the Direct Benefit Transfer (DBT) scheme and other banking services are finding it tough to operate due to reduction in fees and unaffordability of the Aadhar enabled payment system (AEPS).

Key demand of the question:

The answer must provide for a detailed narration of who is a Business correspondents (BCs) in the Banking system? role played by BC in ensuring financial inclusion of all sections of the society.

Directive word:

DiscussThis is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer

Introduction:

write a few introductory lines about the banking/Business correspondent.

Body:

Answers must discuss the following aspects :

  • Who are they? Business correspondents are retail agents engaged by banks for providing services at locations other than a bank branch or an ATM. 
  • Permitted services include: identification of borrowers, collection and preliminary processing of loan applications, collection of small value deposit, disbursal of small value credit, sale of micro insurance, MF products and pension products. 
  • History: In 2006, RBI issued guidelines for engagement of BCs by banks for providing banking and financial services. 
  • Who can act as BCs? The RBI has provided a long list of entities and persons who can act as BCs. 
    • Some of these are NGOs/ MFIs set up under Indian Societies/ Trust Acts (excluding non banking financial companies (NBFCs)), Societies registered under mutually aided co-op. societies (MACs) Act or the Coop. Acts of States, Section 25 companies, Post Offices, Individual kirana/ medical/fair price shop owners etc. 
    • In June 2018, Union government announced that all 2.9 lakh common service centres (CSCs) in the country will operate as business correspondents of banks. 

Conclusion –

Conclude with way forward.