Feasibility of Engaging Corporate Retail Networks as Business Correspondents of Banks: A Study

This study examines the nature of corporate networks in India and their suitability to carry out financial transactions on behalf of banks. It proposes models that use corporate retail networks as business correspondents (BCs).

The Reserve Bank of India launched the concept of BCs to enable banks to extend their network beyond their branches. RBI norms for selection of BCs prefer individuals and entities with a nonprofit motive. The study suggests that for-profit organizations may bring in strengths that may be lacking in nonprofit entities. It identifies factors that make corporate networks better suited to function as BCs than other entities, namely:

• Capacity to invest in infrastructure, human resources and training;
• Commercial orientation and willingness to wait for positive revenues;
• Motivation to expand services and outreach and retain customer base;
• Better financial and operational discipline and monitoring systems;
• Focus on commercial outlook as well as customer-centric ethics;
• Greater business continuity due to strong links in networks.

The study presents pilot designs involving various corporate retail networks as BCs, and discusses cost and revenue implications, sustainability and risks perceived by banks, corporate sector and regulators.