BC / BF - 4 , Banking Fundamentals to Know for Students.

Blog on Banking Technology for Common Customer

 Click Here

HOW THE BC OPERATES 

The legal relationship between the BC and the bank is that of an Agent and Principal bound by a legally enforceable contract. The BC, in turn, employs CSPs are sub-agents of the banks. The BC gets compensated by the bank for the services rendered which are shared with the CSP and the technology provider. The technology provider acts as a link between the bank, BC, CSP and the client creating an enabling environment using technology. 
How the System Operates

1.    The BC and technology providers are selected by the Bank through an open bid process. After evaluating the technological capability of the technology partner of the BC, the contract is awarded to the BC which gives the lowest (L-1) quote.

2.    The BC employs, sometimes in consultation with the Bank, the CSPs who could be educated unemployed youth from the same area, existing retailers, members of the SHG or suitable persons who are permanent residents.

3.    An area of operation is assigned by the Bank to the CSP which is usually a Gram Panchayath or group of Panchayath/villages.

4.    The CSP is assigned a linked branch within the distance criteria stipulated by RBI.

5.    The CSP is given basic training and equipment. The cost of equipment is borne by the CSP or by the technology Company/BC or sometimes by the Bank.

6.    At the front end, the point of service terminal usually consists of a reader, printer, mobile phone connectivity, and RFID smart card which communicate through Near Field Communication (NFC) Protocol. The configuration may vary for the Kiosk model and mobile phone model.

7.    The terminal can handle both, online and offline, transactions.

8.    The terminal is connected to the server of the technology service provider through a broadband/ GSM/GPRS mobile device. The server is interfaced with the bank's core banking server.

9.    The biometric identification is stored in the terminal of the CSP for easy access.

10.  No frill accounts are opened by the CSP by capturing the fingerprints and photographs of the clients and obtaining account opening forms with KYC documents.

11.  The account opening forms with all data captured is sent electronically to the Bank. The base /mother branch/ opens the account after verifying KYC documents and authorizes the issue of a smart card to the client. The process takes about 15 days or sometimes more.

12.  Thereafter, the client can operate the account - deposit or withdraw cash - using the smart card through the CSP.

13.  The mobile phone/laptop of the CSP terminal has all client details which are validated using the smart card and positive identification is established through the fingerprint reader. All transactions pass through the server of the technology provider. The account of the client is debited or credited in real-time or at the end of the day. To enable this, the CSP maintains an escrow or imprest account with the base branch with enough cash balance. The account is frequently replenished by the CSP depending on the operations. The CSP/BC also does reconciliation of accounts on daily/weekly intervals.

14.  The client can also receive MNREGS payments, old-age pension, and other benefits through the account.

15.  The payment of commission to the BC is settled by the bank at the end of each payment cycle which usually is one month depending on the number and volume of transactions.

16.  Though the system appears simple, it is facing several challenges due to various factors including deficiency of infrastructure etc., which is discussed in detail elsewhere in this report.

Cash Management: The CSP/BC is required to maintain sufficiently liquidity by way of deposit with the Bank or can take an Overdraft facility from the branch in whose service area the BC is operating. For instance, liquidity to be maintained by the CSP ranges between Rs10,000 to Rs 25,000/-
Security Deposit: In terms of Bank's Policy, the BC would be required to keep a security deposit equivalent to a fixed percentage of the expected business volumes of a year. 

BC / BF - 3 , Banking Fundamentals to Know for Students.

Blog on Banking Technology for Common Customer

 Click Here

Functions / Activities of Business Facilitators 
(i) Identification of borrowers and fitment of activities
(ii) Collection and preliminary processing of loan applications including verification of primary information/data
(iii) Creating awareness about savings and other products and education and advice on managing money and debt counseling
(iv) Processing and submission of applications to banks
(v) Promotion and nurturing Self Help Groups/Joint Liability, Groups
(vi) Post-sanction monitoring
(vii) Monitoring and handholding of Self Help Groups/Joint Liability Groups/Credit Groups/others
(viii) Follow-up for recovery.

The products that can be canvassed by the BC acting also as a Business facilitator are: 
a. Loans against Valuable securities/own deposits
b. Gold Loans
c. General-purpose Credit card (GCC)
d. Kisan Credit Card (KCC)
e. Loans to SHGs/JLGs
f. Current Account
g. Savings Bank account (other than No Frills Account)
h. Term Deposits
I. Recurring Deposits
j. Mutual funds on a referral basis
k. Insurance (Life and Non-Life), Pension and any other third party financial product.

Skillsets Required to become Business Correspondent 
Financial inclusion is not merely opening of no-frills accounts. It also encompasses giving access to financial products like savings products, loan products, remittance facilities, micro insurance, micro pension, financial planning, and education. Further, the ultimate goal is to make available these services across service providers on a nationwide basis. Taking the above as the basic deliverables expected of a BC, the team spent time in the field observing various BCs and BFs go about their daily routine. Discussions with the BC/BFs also threw a lot of insights. Based on the insights so gained the skills required by BC/BFs are given below:

Functional Skills 
i) Knowledge of the basic principles and practices of banking
ii) Knowledge of the relevant products of the bank in the areas of deposits, advances, insurance, mutual fund products, etc.
iii) Knowledge of the documents required for these products
iv) Knowledge of KYC norms, the different kinds of documents that will be acceptable depending on what it is possible for the customer to produce
v) Ability to use the Point of Sale/biometric device given by the bank and do minor troubleshooting
v) Ability to provide financial counseling to the villagers he is serving
vi) Ability to do a preliminary appraisal of credit proposal to the extent of informing the branch of creditworthiness and bonafide of a potential borrower.

Behavioral Skills 
i) Communication 
a) Verbal Knowledge of the local language, public speaking, etc.
b) Written- to the extent of helping customers in completing the required forms/documentation
ii) Marketing Skills 
a) Building Trust - Since the potential customer does not have a banking relationship with the banks and may not be in a position to read and understand the product/process himself, the BC should inspire trust.
b) Persuasion skills - Banking per se is latent demand and the BC should be able to help the financially illiterate customer to realize the existence of the need and appreciate the need to shift from informal to formal sources of finance.
iii) Customer Service 
a) Empathy - understanding the needs and insecurities of the customer who is often dealing with a bank for the first time
b) Service orientation - the customer of a BC often needs more hand-holding then the average bank customer