Engage corporates, NBFCs as banks' business correspondents: RBI

The Reserve Bank of India (RBI) has proposed the engagement of `for profit' companies, including telecom companies, as well as non-banking finance companies (NBFCs) as business correspondents for expanding banking outreach in the country.

Banks could enter into separate agreements with corporates for using their retail network for a fee or the banks could make the corporate itself as the business correspondent with no direct contract between the retail outlet and the bank, RBI said.

Corporates with large and widespread retail network and larger resources would be more suitable to render banking services in accordance with the bank's internal policies and standards than individuals and other small entities, RBI noted.

Shopkeepers and other retail agents of the large corporates may be more comfortable dealing with the company that they are already used to and familiar with, rather than with the bank, it pointed out.

A corporate is also likely to continue as business correspondent for a longer period than individuals, thus ensuring continuity of services.

On the flip side, failure of large companies as business correspondents would, however, mean a reputation risk to the company and endanger its substantive business, RBI noted.