Elements of Branchless Banking

Business Correspondents (BCs) are engaged by Bank & respective Link Bank Branch act as focal point for BCs Agents ( “CSP”- Customer Service Point) for field operations.

BCs employ (exclusive or nonexclusive) third party outlets, such as small retailers & SHGs, as Agents(Customer Service Points) - CSP, thus enable customers to perform functions that require their physical presence, such as Account opening with due diligence & KYC of Customer and Cash Deposit &Withdrawal .

CSPs contact the customers for enrollment and take biometrics - using technology, such as Payment cards , Fingerprint scanner &/or mobile phones, to identify customers, open Basic-Saving-Account and record transactions electronically.

Reduces the cost of transaction & Reduces the pressure on the banks counters . Large Volumes of small transactions handled easily.
Offer of at least basic cash deposit and withdrawal in addition to transactional or payment services Structuring of the above so that customers can use these banking services on a regular basis (also available beyond normal business hours).

User friendly and Hassle free for disadvantaged masses as there are no challans / vouchers & is conveniently accessible (service provided near their work area / residential location).

The CSP (BC’s Agent) being a permanent resident of the location and knows the customers and their requirements and can assist customers at any time of the day.

Microinsurance

Microinsurance is the protection of low -income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. Low-income people can use microinsurance, where it is available, as one of several tools (specifically designed for this market in terms of premiums, terms, coverage, and delivery ) to manage their risks.A microinsurance policy is simply a low -premium insurance policy. This is not so. There are a number of other important factors. Low-income clients often:

Live in remote rural areas, requiring a different distribution channel to urban insurance products;Are often illiterate and unfamiliar with the concept of insurance, requiring new approaches to both marketing and contracting ;

Tend to face more risks than wealthier people do because they cannot afford the same defenses. So, for example, on average they are more prone to illness because they do not eat as well, work under hazardous conditions and do not have regular medical check -ups;

Have little experience of dealing with formal financial institutions, with the exception of the National Bank of Agriculture and Rural Development (NABARD) Linkage Banking programme;

Often have higher policyholder transaction costs. Thus middle-class, urban, policyholder can send a completed claims form to an insurance company with relative ease: a quick call to the insurance company, receipt of the claims form by post, and then return of the form by post.

IRDA’s Regulations on Micro-Insurance

Building on the recommendations of the consultative group, IRDA notified Micro-Insurance Regulations on 10th November 2005 with the following key features to promote and regulate micro-insurance products. The regulations focus on the direction, design and delivery of the products :

• A tie-up between life and non life insurance players for integration of product to address risks to the individual, his family, his assets and habitat,
• Monitoring product design through “file and use”,
• Breakthrough in distribution channels with inclusion of NGOs, SHGs, MFIs and PACS to provide micro-insurance, with appropriate compensation for their services,
• Enlarged servicing activities entrusted to micro-insurance agents,
• Issue of policy documents in simple vernacular language.
• In recognition of the uniqueness of micro insurance, these regulations enable life and non-life companies to tie-up for offering a combined policy in rural areas.
• The regulations have also eased the norms for entry of agents relating to training and pre-recruitment examination. As an attraction, remuneration to agents has also been leveled across the term of the policy.

DBT ( Direct Benefit Transfer)

Under Direct Cash transfer scheme, Government will directly deposit payments, subsidies, scholarships, pensions etc into the beneficiary’s bank account.

Old system (NREGA payment)

1. A villager earns some cash under MGNREGA.
2. Government gives cash to bank.
3. Bank gives it to B.C.
4. B.C. deposits it into MNREGA worker’s account.

New system (NREGA payment)

1. All accounts will be maintained by core banking system.
2. So, cash directly goes from Government > Bank >MNREGA worker’s bank account.
3. Villagers will have the freedom to make their withdrawals from any BC they choose.