In what is a fairly significant move, one clearly aimed at bringing more and more people into the banking system, the Reserve Bank of India has allowed banks to appoint the following entities as banking correspondents:

— Individual kirana (grocery)/medical /fair price shop owners
— Individual Public Call Office (PCO) operators
— Agents of Small Savings schemes of Government of India/Insurance Companies
— Individuals who own Petrol Pumps
— Retired teachers and
— Authorised functionaries of well run Self Help Groups (SHGs) linked to banks.

However, don’t expect every second grocery shop you visit to be a banking correspondent: Banks will have to do the necessary due diligence on the appointed Banking Correspondents. Risk mitigation and complaint resolution is a key factor for the RBI, and they’ve said that will look upon any unfair practices seriously. In that context, they’ve also asked Banks, and not banking correspondents, to collect service charges from customers, in a transparent manner.

From a digital commerce perspective, there are two things to note:

— Firstly, the RBI has also recommended that technology solutions for authentication and security be adopted for minimizing risk. Thats an opportunity for a company like Eko India Financial Services, a CGAP funded project which is a business correspondent for India’s largest public sector bank, State Bank of India. Eko already has a technology supported branchless banking setup, in partnership with Bharti Airtel for network access, which – if they choose to do so – can be provided to banks as a white labeled solution. Eko, at present, has a network of banking service points.

— Secondly, it’s notable that telecom operators are not among the entities designated as banking correspondents, despite the fact that they have a distribution network, the wherewithal to do due diligence on retail agents, and network infrastructure for such services. A couple of weeks ago, mobile payments company Paymate had launched a money transfer service with Tata Teleservices, which allowed designated PCO operators to serve as money transfer agents.

While the RBI guidelines are based on bringing more and more people into the banking ecosystem, one wonders whether banks can afford the low ARPU customers. As R Chandrasekhar, Secretary, Department of IT had said a couple of months ago, financial inclusion is difficult unless the need for having a formal bank account is dispensed with.

Linking Mobile, UID & Payments, Without Bank Accounts – R. Chandrashekhar