Executive Summary
The Reserve Bank of India has issued comprehensive draft directions aimed at revamping the Business Correspondent (BC) network to enhance last-mile financial inclusion. The core directives classify service delivery points into Branches, Business Correspondent-Banking Outlets (BC-BO), and Business Correspondent-Banking Touchpoints (BC-BT). It uniformly phases out the Business Facilitator (BF) model by September 30, 2026, establishes standardized remuneration frameworks, and institutes stringent Board-level oversight.
1. Commercial Banks
🏢 Applicable Entity
All Scheduled Commercial Banks (excluding RRBs, covered separately), including subsidiaries of foreign banks operating in India.
⚙️ Specific Changes Required
- Reclassification: Mandatory classification of existing BCs into BC-BOs (fixed point, minimum 4 hours/day, 5 days/week) and BC-BTs (flexible, limited interoperable services).
- Subsuming BFs: Immediate cessation of engaging new Business Facilitators. Existing BFs must be transitioned to the BC model.
- Uniform Remuneration: Implementation of a hybrid pay structure (fixed + variable) for BC-BOs and a variable structure for BC-BTs, aligned with forthcoming IBA benchmarks.
- Inactivity Monitoring: BC-BOs must be flagged as “Inactive” if no financial/non-financial transactions occur for 60 continuous days.
📋 Management Action Plan
- Audit & Mapping: Conduct a pan-India audit of the current BC/BF network to identify units qualifying as BC-BOs vs. BC-BTs.
- Board Policy Revision: Draft an updated BC Engagement Policy detailing the new remuneration structure, 60-day inactivity protocols, and robust grievance redressal systems for Board approval by Q2 2026.
- IT Systems Upgrade: Configure Core Banking Systems (CBS) to automatically track and report 60-day inactivity at the terminal level and process real-time transaction alerts.
- Transition Program: Launch a transition and certification drive for existing BFs to convert them into BC-BTs prior to the September 30 deadline.
2. Small Finance Banks (SFBs)
🏢 Applicable Entity
All registered Small Finance Banks in India.
⚙️ Specific Changes Required
- Rural Target Alignment: BC-BOs in Tier 5 and 6 centers will continue to be evaluated against the mandatory 25% Unbanked Rural Center (URC) branch requirements, but they must strictly adhere to the new “minimum operating hours” rule.
- Governance Overhaul: SFB boards must review BC operations at least once every six months.
- Prefunding Tapering: Requirements for prefunding BCs and sub-agents must progressively taper down.
📋 Management Action Plan
- URC Compliance Check: Immediately review the operating hours of existing rural BCs to ensure they meet the 4-hour/5-day threshold to preserve URC compliance status.
- Liquidity Risk Adjustment: Formulate a glide path for reducing BC pre-funding limits as mandated, integrating alternative risk management measures.
- Agent Training: Ensure local touchpoint agents are personally introduced to local communities to prevent impersonation, as per enhanced due diligence norms.
3. Payments Banks (PBs)
🏢 Applicable Entity
All registered Payments Banks operating in India.
⚙️ Specific Changes Required
- Service Tiering: Distinct separation of services between BC-BOs (full PB suite including account opening/cash deposits) and BC-BTs (strictly small-value cash transactions and remittances up to defined thresholds).
- Exclusion of Machines: Clarification that ATMs, E-lobbies, CDMs, and E-Kiosks cannot be treated or reported as BOs or BC-BTs.
- Direct Accountability: PBs are held fully and directly responsible for the actions/omissions of their vast BC networks and sub-agents.
📋 Management Action Plan
- Transaction Capping: Program CBS and mobile agent applications to strictly enforce hard transaction limits on BC-BT channels.
- Endpoint Rationalization: Purge any automated kiosks previously misclassified under the human-led BC/BO metrics in regulatory reporting.
- Consumer Protection Framework: Deploy hyper-local vernacular grievance redressal displays at all BC-BO/BC-BT locations to mitigate liability risks.
4. Local Area Banks (LABs)
🏢 Applicable Entity
Local Area Banks operating within their specific geographically restricted districts.
⚙️ Specific Changes Required
- Simplified Eligibility: Adherence to the newly simplified eligibility criteria for engaging local agents, removing complex previous financial soundness stipulations.
- Uniform Commission: Standardizing local agent payouts to match the hybrid (fixed/variable) models of larger commercial banks.
📋 Management Action Plan
- Contract Renegotiation: Review and amend all existing agreements with local field agents to reflect the new BC-BO/BC-BT classification and payment models.
- Oversight Committee: Form a dedicated internal committee to physically monitor and supervise localized BC-BO networks for uninterrupted service.
5. Regional Rural Banks (RRBs)
🏢 Applicable Entity
All Regional Rural Banks sponsored by commercial banks.
⚙️ Specific Changes Required
- BF to BC Migration: The heavy reliance on local Business Facilitators in villages must pivot. BFs must become certified BC-BTs by September 2026.
- Signage and Disclosures: Mandatory prominent display of working hours, working days, and exact services offered at rural BC-BO sites.
- Tech Integration: Transactions must hit the RRB’s CBS in real-time, sending immediate customer notifications.
📋 Management Action Plan
- Sponsor Bank Collaboration: Work closely with the sponsor commercial bank to upgrade CBS gateways to handle real-time remote BC transactions without downtime.
- Village Drive: Distribute standardized, vernacular signage to all qualifying rural BC-BOs detailing hours and grievance helplines.
- Sub-agent Due Diligence: Initiate a mass KYC and reputation/market-standing verification exercise for all transitioning rural BFs.
6. Urban Co-operative Banks (UCBs)
🏢 Applicable Entity
All Primary (Urban) Co-operative Banks.
⚙️ Specific Changes Required
- Rationalization of Models: Explicit elimination of the BF model. UCBs must rely purely on the BC framework (BC-BO and BC-BT).
- Board Institutionalization: Creation of a Board-level institutional system to periodically review BC implementations, complaint redressal, and agent selection.
- Harmonized Eligibility Criteria (ECBA): Shift from the old “Financially Sound and Well Managed” (FSWM) norms to the harmonized Eligibility Criteria for Business Authorization (ECBA).
📋 Management Action Plan
- ECBA Readiness: Assess the bank’s March 31 financial audits against the new ECBA criteria to ensure continued authorization to expand the BC network.
- BF Elimination Strategy: Issue notices to existing BFs regarding their mandatory transition to BC-BTs by September 30, 2026, or terminate the arrangement.
- Board Sub-Committee: Form a dedicated Board sub-committee for half-yearly reviews of BC agent performance, customer satisfaction, and remuneration payouts.
7. Rural Co-operative Banks (RCBs)
🏢 Applicable Entity
State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs).
⚙️ Specific Changes Required
- Tech-Driven Expansion: Formal permission to aggressively engage BCs to expand outreach into underserved areas without the heavy CapEx of setting up physical brick-and-mortar branches.
- Branch Segregation: Strict stipulation that BCs cannot operate out of existing physical bank branches. They must be dedicated standalone delivery points.
- Standardized Remuneration: Shift away from ad-hoc rural payouts to a structured commission model governed by IBA recommendations.
📋 Management Action Plan
- Tech Procurement: Invest in robust, mobile-first BC technology that integrates securely with the RCB’s core banking software, ensuring real-time capabilities.
- Geographic Mapping: Identify deep rural pockets lacking physical branches but possessing stable telecom connectivity to deploy new BC-BOs.
- Separation Check: Ensure any existing BCs operating within bank branch premises are relocated to independent locations to comply with the new directives.