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Private Banks rely on BCs to expand business in Rural areas


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Private sector banks in India are increasingly relying on business correspondents (BCs) to expand their operations in rural and semi-urban areas. BCs are cost-effective for lenders and can perform a wide range of banking services, enabling last-mile reach as mandated by the Reserve Bank of India (RBI).

BCs have traditionally been used by public sector banks to provide basic banking transactions in rural areas. However, BCs now offer over 20 types of banking services, including deposits, loan generation leads, and third-party products.

Benefits and Expansion Plans

Private sector banks see BCs as a way to expand their presence in the outskirts of major cities and increase their footprint. By utilizing BCs, banks can raise term deposits or savings accounts with a fair amount of balance in identified branches. This can lead to an increase in low-cost current account and savings account (CASA) deposits and retail deposits.

For example, RBL Bank aims to add 4% in low-cost CASA and retail deposits in one year if it can collect Rs 10 lakh per branch per month.

HDFC Bank, the country’s largest private sector lender, has also used the BC channel to reach 2 lakh villages in FY24. The bank partnered with common service centers (CSCs) to develop its BC model, leveraging their extensive rural network. CSCs provide various government services and have a wide presence in rural panchayats.

Similarly, Axis Bank has grown its CSC village level entrepreneurs (CSC VLE) network by over 2X in the last two years. VLEs deliver government and non-government services to end consumers from the CSC outlets.

Financial Inclusion and Growth

The use of BCs by private and public sector banks is driven by the need to meet targets and the RBI’s mandate to provide banking services to the unbanked population. BCs play a crucial role in financial inclusion by providing banking services to rural areas and enabling growth.

The BC model allows banks to provide door-step delivery of services, addressing the last-mile problem and bringing banking services closer to the rural population. This model has gained importance as banks compete to attract deposits, especially low-cost CASA deposits.

BCs have emerged as the predominant delivery model for banks to expand their last-mile outreach in unserved and underserved areas of the country. The number of BCs has grown significantly in recent years, while the number of branches and banking outlets in villages has increased at a slower rate.

Conclusion

Private sector banks in India are increasingly relying on business correspondents (BCs) to expand their operations in rural and semi-urban areas. BCs offer a cost-effective way for banks to provide a wide range of banking services and enable last-mile reach as mandated by the RBI. By leveraging the BC model, banks can enhance their presence in rural areas, attract deposits, and promote financial inclusion.

One Comment

  1. Private Bank हो या सरकारी ये सभी BC का शोषण करते हैं।
    मामूली सा कमीशन भर देकर Daily,Weekly,Monthly Target दिया जाता है।

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