Scaling up of the Business Correspondent (BC) Model – Issues in Cash Management  

Reserve Bank of India vide Notification No RBI/2013-14/570 RPCD.FID.BC.No. 96/12.01.011/ 20013-14 dt.April 22, 2014, has clarified certain points Cash Management issues faced by Business Correspondents.

Background: Para 26 (Part B) of Governor’s bi-monthly policy statement dated April 1, 2014 on the above subject states the following:

“On financial inclusion, the fourth pillar, the recommendations of the Mor Committee on accelerating the flow of credit to those at the bottom of the pyramid and enlargement of catchment area of the Business Correspondents (BCs), including through possible inclusion of new entities as BCs, are under examination. To overcome the challenge of cash management of BCs which is impeding the scaling up of the BC model, the Reserve Bank will collate best practices and issue a fresh set of guidelines to commercial banks.”

One of the main pain points stated by Business Correspondents is the banks insistence to BC’s to fully prefund their accounts even after long business relationship. This was mentioned as a major impediment in scaling up the business.

Another concern point is the delay in release of remuneration to the BCs’. Further, banks insist that the cash insurance has to be taken care by BCs.

RBI has clarified that the cash though handled by BCs is on behalf of the Bank and the ownership of the cash rests with the respective bank.

Hence, to enable BCs to comfortably scale up their business, RBI has advised the Banks as under:

  • The Boards of the Banks must review the operations of BCs at least once every six months with a view to ensuring that requirement of prefunding of Corporate BCs and BC Agents should progressively taper down with the passage of time.
  • Ideally in all normal cases the prefunding should progressively come down in such a manner so as to reach around 15% of the limits fixed for each BC/CSP in case of deposits and 30% in case of Bank Guarantees, etc. in say 2 years from the time a BC starts operations.
  • The Board should also review the position of payment of remuneration of BCs and should also lay down a system of monitoring by the top management of the Bank.
  • The issue of allowing BCs to handle deposit and payment transactions of various credits, remittance, overdraft and other products of banks must also be examined by the Board from time to time.
  • Complaints redressal system in this regard should also be laid down by the Board.


  • As the cash handled by BCs is Bank’s cash, the responsibility for insuring this cash should rest with the banks.


The first sets of guidelines on BC’s were issued by RBI on January 2006.  For a sample list of Business Correspondents operating in India, please click here.


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