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FI : RBI GUIDELINES

Introduction of BC/ BF Model Use of Information Technology: Smart cards for opening bank accounts with biometric identification and mobile banking etc. Simpler KYC Norms No-Frills accounts General purpose Credit Cards (GCC) SLBC Project of 100% Financial Inclusion. All house-holds

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FI : RBI GUIDELINES

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  1. Introduction of BC/ BF Model Use of Information Technology: Smart cards for opening bank accounts with biometric identification and mobile banking etc. Simpler KYC Norms No-Frills accounts General purpose Credit Cards (GCC) SLBC Project of 100% Financial Inclusion. All house-holds in villages with more than 2000 inhabitants should have bank accounts by March 2011. F.I. Fund / F.I. Technology Fund (Budget allocation increased by Rs. Cr) Financial Literacy - Credit Counseling Centre GoI’s Guidelines Opening of atleast 250 household accounts by RUSU branches. (Rangarajan Committee recommendations). FI : RBI GUIDELINES 1

  2. WHO CAN BECOME BC OF BANKS? RBI has permitted the following categories of entities/individuals as eligible for being engaged as BCs by the banks. NGOs/MFIs set up under Indian Societies/Trust Acts. Societies registered under mutually aided co-op. societies (MACs) Act or the co-op. Acts. of states. Section 25 companies. Post offices. Retired Bank employee Ex-Service men Retired Govt. Employees Individuals as per details in the next slide RBI

  3. AREA OF OPERATION - DISTANCE CRITERIA • RBI’s instructions for distance criteria are: • The distance between the place of business of the BC and the base (link/branch) should not exceed 30 kms. in rural/semi urban areas. • In case the distance is more than 30 kms., in rural/semi-urban areas, the DCC/SLBC would approve the same. • In case DCC/SLBC does not give any decision within 3 months, the request will be treated as approved, and DCC/SLBC notified by the Link Branch accordingly.

  4. TECHNOLOGY INITIATIVES Outreach through – Smart Card & PoS based combination. PC based Kiosk with internet connectivity Cell phone based messaging Channel Products offered – Savings Bank Recurring Deposit Remittances SB-cum – OD Tiny Card to SHGs as a group 4

  5. SBI TINY CARD • A chip based smart card both contactless and with contact • Also chipless cards for Govt. payments • Operated with fingerprint identification facility having provision to support 10 to 12 accounts. • Card based operations are complete in pos (a mobile phone, fingerprint scanner & printer) supports SB, RD & remittance OD product being introduced shortly. • Through technology partners viz. M/s A LITTLE WORLD & FINO. 5

  6. SBI SHG TINY CARD Benefits to SHGs • Get banking services at the place of stay even at odd hours • No loss of time/earnings and no cost due to travel to branches. • Avert facing the discomfiture of being turned away by branches. • Increased savings by depositing even day to day surplus in Bank A/c which otherwise would get spent. Benefits to Bank • De-congest the branches, freeing staff for attending to high value business. • Invigorated outreach in rural & semi-urban areas • Improvement in customer service through enhanced level of customer satisfaction. • Multi products delivery • Improved MIS on micro customers 6

  7. KIOSK BANKING MODEL • Provides Internet based, Bio-metrically enabled Banking service to the rural customers through Business correspondent model. • Through this alternate channel, customers can do online, real time banking transaction locally at his place without the Bank’s branch. • The Kiosk Operator uses his own PC for this operations. Cost effective if existing infrastructure (with VLEs etc.) is utilised.

  8. FI: KIOSK BANKING cotd. ♦ Business Correspondent ♦ Administrator ♦ Kiosk operators or CSP • ♦ A Bank official, who manage, control and administer the application. • ♦ A set of menus are available through which he creates, amends, deletes, controls the BC and the Kiosk operator. • ♦ Has highest capability level in the application. • ♦ An independent entity who appoints his agents called kiosk operators or CSPs • ♦ Menus are provided for BC’s to create, amend, delete and effectively control the Kiosk operators. • ♦ The actual entity executing the banking services done as per the laid down rules and regulations. • ♦ Services including deposit, withdrawal, enquiry, statement of accounts, customers creation ,id card generation, report generation are made available to the kiosk operators. 8

  9. MOBILE BANKING • Use low end mobiles with PIN and signature booklet. • A customer owned cellphone can enable the service in conjunction with a service delivery agents cellphone. • No bio metrics. • Customer gets acknowledgement through sms. • MOBILE BANKING FI through EKO • ADVANTAGE: Avoids cost of POS, card, PC-kiosk and fingerprint machine etc. - a cheap & simple model for FI. 9

  10. RISK MITIGATION MEASURES Some measures taken by Banks are: • Obtaining Security Deposit, due diligence process in selection, committee approach for selection etc., • Link Branches to oversee the activities of CSPs. • Periodical checks by various visiting Bank officials - dedicated channel functionaries, controllers and audit team. • Banks to call for Disaster Recovery Plans from BCs and review periodically. • Photograph to be affixed/verified by BC on customer enrolment form. • The photographs will be captured in the system using camera with POS or web-camera and sent to the server of the tech. vendor/CBS. • Fidelity insurance to be obtained on individual BCs

  11. CASH MANAGEMENT • The cash management would be the responsibility of the BCs including arranging transit insurance cover. • The CSP needs to ensure that at no point of time it is out of cash, and customers are given uninterrupted service. • Similarly, adequate balance is maintained in the settlement account of the BC. • The premium on transit insurance, however, may be reimbursed by banks on a case to case basis. • If requested, overdraft limits are made available to BCs to enable them to get physical cash for deployment at CSPs.

  12. ENABLERS FOR BCs • Loans Loans are being granted to BCs on merits for acquiring equipments/machines/furniture etc. to set up the CSP like PoS machines, finger print scanner, computer, mobile, furniture etc under existing schemes for term loans. • Training - Banking operations The BCs /CSP operators get trained by Banks before they begin operations. - Technology equipment handling Technology vendors also assist for training in operation of the equipments.

  13. BENIFITS OF BC MODEL DRIVEN BY TECHNOLOGY • Benefits to customers • Proximity of operations. Travel time saved. • Savings habit. • Safety of funds e.g. women workers. • Validity simple – biometric. • Flexibility in timings. • Simple process. • Familiarity with BC – local Benefits to BCs(BC= BF +) • Income generation and viable business (when BF activity is also carried out) • Convenience of business. • Achieve other goals – Outreach, presence • (To launch other business / activities) • Social goals. 13

  14. BENIFITS OF BC MODELDRIVEN BY TECHNOLOGY contd. Benefits to Banks • Outreach through Alternate Channels • Brick & Mortar Branches - Difficult & Costly • Staff Issues in rural areas. • Need local presence in rural/semi-urban centers • Door to Door approach through CSPs • Cost effective – High cost of delivery through traditional channels. • Business – Bottom of the pyramid. • Reach unbanked villages / areas. • Meet CSR objectives. 14

  15. CHALLENGES • For the Banks • Shortage of BCs • Viability of Alternate Channels • Measuring & Monitoring performance for Alternate Channels • Branch expansion constraints • Sensitization of operating staff • Implementing Risk mitigation measures • Technology: • Evolving technologies – need to engage latest tech platforms and processes. Multiple front end tech but with a common back end process. All accounts to be in the CBS of Bank eventually Developing core products catering to specific populace (SHGs) Added focus on interoperability, scalability and security issues Integrating with CBS In house learning and cost. 15

  16. CHALLENGES contd. • For the BCs • Setting up CSPs • Access to rural areas • Connectivity problems • Cash handling (e.g. Govt. Benefit payments)-BCs need support • Small ticket deposits/loans/transactions yield small commission • Enrolment Process requires identifying persons correctly, similar names and similar village. 16

  17. Social Challenges Inhibitions due to Illiteracy & Lower economic status Need for Financial Literacy Campaign Regulatory directives KYC/AML issues Outsourcing and bank’s responsibility for their agents Ensuring inter–operability and open standards Restricted eligibility criteria permitted by RBI to be BCs Restrictions on engaging sub agent CHALLENGES contd. 17

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