RBI permits NBFCs to work as Business Correspondents of banks

With a view to achieve financial inclusion, the Reserve Bank of India has allowed Non-Banking Finance Companies to operate as Business Correspondents (BCs) of banks, permitting them to offer limited services. Banks will be allowed to work with non-deposit taking NBFCs as BCs.
Until now, NBFCs were not allowed to function as BCs, which provide limited services on behalf of banks in unbanked areas.
As per the apex bank, there should be a contractual arrangement between a bank and an NBFC-ND to ensure that potential conflicts of interest are taken care of.
Banks must ensure that the NBFC-ND does not adopt restrictive practices such as offering savings or remittance services only to its own customers or bundling of their services.
The RBI has removed the distance criteria for BCs to provide functional flexibility to banks.
The RBI took into account recommendations of Nachiket Mor Committee while reviewing the existing guidelines on the appointment of BCs.

Month: Current Affairs - June, 2014