India’s quest to achieve financial inclusion is likely to result in the entry of small players into banking services. If the Reserve Bank of India accepts the suggestions of an RBI Working Group, people in remote areas would be able to open bank accounts and carry out the full range of financial services at the local kirana and medicine shops and public call offices (PCOs).

The working group to review the business correspondent (BC) model — wherein intermediaries are allowed to carry out banking functions — said new entities such as public call office operators, kirana stores, medical and fair price shop owners should be used by banks to speed up financial inclusion. Others who can be roped in to spread banking functions, as per the group, include agents of small saving schemes and insurance companies, petrol pump owners, retired teachers, select self-help groups and non deposit taking non-banking finance companies.

“Banks would need to accept the BC model as extremely vital for achieving the goals of financial inclusion. As the traditional ‘brick and mortar’ branches could penetrate into remote areas of the vast country only to a limited extent, this model presented banks with a workable option to provide banking services in inaccessible areas in a cost-effective manner,” the RBI Working Group said.

Further, the group noted that BCs should be used not only for opening and servicing no-frills accounts but for the full range of financial activities. With the Central and state governments planning to route various government payments through the banking system, the BCs could be the ideal medium for the banks to handle the huge volumes of low-value transactions, it said.

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