Financial inclusion, a pet theme of finance minister Pranab Mukherjee and the Reserve Bank of India (RBI), is set to get a fillip with a major overhaul of the entire business correspondent model currently practised by the financial institutions. Within next few weeks, government is likely to allow business facilitators to work as business correspondents, which is expected to consolidate banking in the hitherto unbanked areas. Despite more than five years elapsing after the RBI allowed banks to employ business correspondents (BC) and business facilitators (BF) to expand their outreach, the model is yet to become an economically viable for most stakeholders. Experts say that it takes several years for a bank to break even in an unbanked area and therefore BC option enables banks to reach out much faster at a much lower cost. Around 85,000 of the one lakh villages are covered by banks through the BC channel. To make the model economically viable the government is planning to allow BF too to transact on behalf of banks. “Allowing a BF to handle the work of a BC would help increase viability of the business”, said a senior finance ministry official.
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