NSDC - Banking Correspondent Power Point

Banking Correspondent & Business
Facilitator Training Program

- National Stock Exchange of India
Copyright 2011 National Stock Exchange of India Ltd.

BUSINESS
CORRESPONDENT
2
Definition of Banks
Bank is a financial Institution which acts as an
intermediary between savers/investors and users of
fund.
An establishment authorized by the Government to

accept deposits, pay interest, clear cheques, make
loans, act as an intermediary in financial transactions,
and provide other services to the customers.
Banks can either be classified as Commercial or Co-

operative Banks
3
Structure of Indian Banks
Banks in India
Commercial Banks Co-operative Banks
Public Private Foreign Regional Local Area Urban Agri

Sector Sector Land
Banks Rural Banks Banks
Banks Banks Co-op Co-op Development
Banks
Banks Banks
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Commercial Banks
Public sector bank : Public sector banks are those in which the majority
stake is held by the Government of India (GoI). Public sector banks
together make up the largest category in the Indian banking system.
There are currently approx. 27 public sector banks in India. It includes
SBI & its associates And Nationalized Banks.
Private Sector Banks : In these types of banks, the majority of share

capital is held by corporates, institutions and individuals. The private
banks e.g. ICICI Bank, Axis Bank, Jammu & Kashmir Bank etc.
Foreign Banks : Foreign banks have their registered and head offices in
foreign country but operate their branches in India. The RBI permits
these banks to operate either through branches; or through wholly-
owned subsidiaries. These banks offer products such as automobile
finance, home loans, credit cards, household consumer finance etc
5
Commercial Banks
Regional Rural Banks : Regional Rural Banks (RRBs) were

established during 1976-1987 with a view to develop the rural
economy. Each RRB is owned jointly by the Central Government,
concerned State Government and a sponsoring public sector
commercial bank. RRBs provide credit to small farmers, artisans,
small entrepreneurs and agricultural labourers.
Local Area Banks : These are banks which have been given
license to functions in a given area. They operate with a low level
of capital and cannot offer all the financial services of a commercial
bank.
6
Regional Rural Banks
Started in 1975 during the Emergency with the aim of providing
credit to small and marginal
Farmers
Agricultural labourers
Rural artisans
Street vendors
Those living below poverty line
They were conceived as low cost institutions having rural bias, local
feel and pro-poor focus.
7
Co-operative Banks
Urban Co-op Banks: The term Urban Co-operative Banks (UCBs),

though not formally defined, refers to primarly cooperative banks
located in urban and semi-urban areas. These banks, till 1996, were
allowed to lend money only for non-agricultural purposes.
Agri Co-op Banks: eg. NABARD : NABARD is the apex institution in the
country which looks after the development of the cottage industry, small
industry and village industry, and other rural industries. NABARD also
reaches out to allied economies and supports and promotes integrated
development.
Land Development Banks (LDB): The long-term finance required by

the agriculturists for the purchase of agricultural machinery and for
effecting permanent improvements on land cannot be provided by com-
mercial banks and co-operative banks. LDBs are able to lend their
money for long periods to agriculturists.
8
Reserve Bank Of India (RBI)
The Reserve Bank of India (RBI) is the central bank of the country. It
was established on April 1, 1935 under the Reserve Bank of India Act,
1934, which provides the statutory basis for its functioning.
When the RBI was established, it took over the functions of currency
issue from the Government of India and the power of credit control
from the then Imperial Bank of India.
As the central bank of the country, the RBI performs a wide range of
functions; particularly, it :
Acts as the currency authority
Controls money supply and credit
Manages foreign exchange
Serves as a banker to the government
Builds up and strengthens the country's financial infrastructure
Acts as the banker of banks
Supervises banks
9
Bank Deposit Accounts
Introduction to Bank Deposits
One of the most important functions of any commercial bank is to accept

deposits from the public, basically for the purpose of lending. Deposits
from the public are the principal sources of funds for banks.
Safety of deposits : At the time of depositing money with the bank, a

depositor would want to be certain that his/her money is safe with the
bank and at the same time, wants to earn a reasonable return.
10
Types of Deposit Accounts
The bank deposits can also be classified into :
Demand deposits : are defined as deposits payable on demand through

cheque or otherwise. Demand deposits serve as a medium of exchange,
for their ownership can be transferred from one person to another
through cheques and clearing arrangements provided by banks. They
have no fixed term to maturity.
There are several deposit accounts offered by banks in India; but they
can be classified into three main categories:
Current account deposits
Savings bank deposits
Term deposit account (Fixed deposit & Recurring deposits)
11
Types of Interest
When money is advanced by bank (known as loans and

advances), the borrower usually pays a charge or fee to the
bank for the use of money. This fee is called INTEREST
Simple Interest
Compounding Interest
Fixed & Floating
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Simple Interest
Simple Interest is a fixed percentage of the amount borrowed, known as
the principal. The formula for calculation of simple interest is as follows:
INTEREST = PRINCIPAL X RATE OF INTEREST X TIME
Interest = Total Amount of Interest Paid

Principal = Amount of Money Borrowed
Rate of Interest = Percentage of principal charged as interest each year
Time = Period for which the money is used
13
Compounding Interest
FV = PV (1+r)^t
Example 1: Calculate the value 5 years hence of a deposit of Rs.1,000
made today if the interest rate is 10%.
Solution:
By discrete compounding
FV = 1,000 * (1+0.10)5 = 1,000 * (1.1)^5 =(1.10 x 1.10 x 1.10 x 1.10
x 1.10) = 1,000 * 1.61051 = Rs.1,610.51
By continuous compounding
FV = 1,000 * e^(0.10 * 5) = 1,000 * 1.648721 = Rs.1,648.72
Example 2: How much does a deposit of Rs. 5,000 grow to at the end of
3 years, if the nominal rate of interest is 10 % and compounding is done
quarterly?
Solution: Future value = 5,000 * ((1 + 0.10/4)^(4*3)) = Rs.6,724.45
14
Fixed & Floating Interest Rates
Fixed rate of Interest Once fixed will not change during the entire
period of loan
Floating Rate of Interest Changes depend upon market condition.

They are generally re-set every half year and benchmarked to inflation
or bank rate etc. It may increase or decrease whenever the
base/bench-mark changes
15
BANKER CUSTOMER
RELATIONSHIPS
16
Different Types of Banker - Customer
Relationship
Debtor Creditor (Bank is the Debtor & Customer is the Creditor)
Creditor Debtor (Bank is a Creditor & Customer is a Debtor)
Bailee Bailor (Bank is Bailee and Customer is a Bailee)
Agent Principal (Bank is Agent and Customer is Principal)
Lessor Lessee (Bank is a Lessor and Customer is Lessee)
Trustee Beneficiary (Bank is a Trustee and Customer is Beneficiary)
17
Services to different Customer Groups
A bank with a widespread network of branches aims at serving the
following broad customer groups.
Retail customers
Corporate customers
International customers
Rural customers
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ANTI MONEY
LAUNDERING AND
KNOW YOUR CUSTOMER
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Anti Money Laundering
Money Laundering is an undesirable process wherein the origin of funds
generated by illegal means (blood diamonds, drug trafficking, illegal
arms trade, corruption, extortion etc.) is concealed.
It is great issue of generation of illegal money and routing the same into
legal channels. Is not new but earlier it used to be mostly confined to
the economies where it is generated.
Improved IT usage in banking transactions, where a face to face contact

with customer is missing, has also made it difficult to detect money
laundering.
Government of India has enacted, in the year 2002, Prevention of

Money Laundering Act.
20
Money Laundering Stages and Types
Placement : It means physical disposal of proceeds of criminal

activity
Layering : It means separation of illicit proceeds from their source

by creating complex layers of financial transactions thereby avoiding
audit trail and providing anonymity to the source of funds
Integration: This is the final phase in which such moneys are

invested in legitimate economic activity as normal funds
21
KNOW YOUR CUSTOMER (KYC)
WHY KYC?
Banks are required to initiate steps to prevent the money laundering at
the first stage itself
Banks cannot identify the sources of funds at first step itself
KYC procedure is important for both types of transactions i.e. Deposit

Transactions and Loan Transaction
Banks are required to know the actual identity of the customer

Financial Background
Volume of transaction
22
KYC FORM For Customer Identification
An Account Opening Form is filled by the Customer which contains

the Name, Address, Email Id, Mobile Numbers, Land Line Telephone
Numbers, Signature on the Form and an Agreement which is in the
standard format designed by bank.
Customers are divided into various categories based on the risk

profiles and business.
There can be different Categories of A/c Individual, Joint Holders,

Corporates ( Private Limited or Public Limited Companies).
23
Proof of Identity
Customer Identification should be reliable source. The acceptable list as

Proof of Identity is:
Permanent account
Passport
Number (PAN)
Driving Licence Voter Identity Card
Identity Card issued by the Employer, if

acceptable to the Bank
24
Common Guidelines of Opening & Operating
Deposit A/cs
Due Diligence Process
Minimum Balance
Transparency
Eligibility
Requirement of PAN
Operation of Joint Account
Power of Attorney
Closure/renewal of deposits
Nomination
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Deposit Related Services
Customer Information
Interest Payments
Premature Withdrawal of Term Deposit
Premature Renewal of Term Deposit
Advances against Deposits
Settlement of Dues in Deceased Deposit Account
Stop Payment Facility
Dormant Accounts
Safe Deposit Lockers
Redress of Complaints and Grievances
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BASICS OF BANK LENDING
The main source of funds for a banker for lending or investments is

deposits from the public, which are repayable whenever demanded by
the depositors,
Banks extend credit to different categories of borrowers for a wide

variety of purposes. For many borrowers, bank credit is the easiest to
access at reasonable interest rates. Bank credit is provided to
households, retail traders, small and medium enterprises (SMEs),
corporates, the Government undertakings etc. in the economy.
27
Principles of Lending
The business of lending is not without certain inherent risks,

especially when the lending banks depend largely on borrowed funds.
The main Principles of lending are as follows :

Safety
Liquidity
Profitability
Risk diversion
Productive Purposes
Security
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Loan policy
The loan policy outlines lending guidelines and establishes operating

procedures in all aspects of credit management. The loan policy typically
lays down lending guidelines in the following areas :
Level of credit-deposit ratio

Targeted portfolio mix
Hurdle ratings
Loan pricing
Collateral security
29
Compliance with RBI guidelines
The credit policy of a bank should be conformant with RBI guidelines;
some of the important guidelines of the RBI relating to bank credit are :
Directed credit stipulations

Capital adequacy
Credit Exposure Limits
Lending Rates
Guidelines on Fair Practices Code for Lenders
Regulations relating to providing loans
30
Types of Loans and Advances
Advances can be broadly classified into:
Fund-Based Lending : This is a direct form of lending in which a loan

with an actual cash outflow is given to the borrower by the Bank.
Non-Fund Based Lending : In this type of facility, the Bank makes no

funds outlay. Facilities such as 'letters of credit' and 'guarantees' fall
under the category of non- fund based credit.
31
Some important types of fund-based lending
Working Capital Finance

Project Finance
Loans to Small and Medium Enterprises
Rural and Agricultural Loans
Directed Lending
Retail Loan
International Loans Extended by Banks
32
What is Financial Inclusion?
Financial Inclusion is the delivery of Financial Services by the formal
financial system at an affordable cost to low income groups.
It includes provisions for savings, loans, insurance payments and
remittance facilities
Eg. farmers, landless labourers, share croppers, women workers in
unorganized sectors etc.
33
Relationship between Bank and Customer
Banks usually place their customers into certain categories so that
they are able to :
(a) develop suitable products according to customer requirements
(b) service customers efficiently.
While banks are competing with each other to attract the most
profitable businesses, Financial Inclusion is increasingly becoming
part of their agenda.
Banks have started using innovative methods in approaching the

customers; technology is an important component of such efforts.
34
Savings Insurance
Payment
Bank
and
Accounts
Remittance
Financial Financial Affordable

Advise Inclusion Credits
35
Financial Inclusion
When we look at the issue of Financial Inclusion, one particular set of
economic community stands out as very distinct. This is the class of
marginal and sub-marginal farmers who have no access to irrigation and
cultivate non commercial crops.
The major problem faced by these people are illiteracy, daily labourers
(they get daily wages so they cannot waste a single day without income),
communication problem, no knowledge about banking activities etc.
If the problems of this class of farmers is addressed then the core issue
of poverty and financial inclusion in rural areas can be taken care.
36
I live in a very small Village.
Why should I open a Bank
Account which is far from my
village. If I do that then every
time I have to go to Deposit
Money or Withdraw Money, I
will waste my day, and lose
earning of one day
37
I am illiterate, don't
know how to fill bank
slips, complete paper
work and most banks /
post-offices dont treat
poor people with
respect.
38
So what is the solution
Need of an Agent between Banks and

the poor people / farmer
39
Why An Agent is Needed?
More than 6-7 lakhs of villages where banks cannot open branches.
Reasons:
High Administrative Costs
Building Rent
Telephone
Electricity
Staff Salary
Security Guards
Volume of business is very Low

Reluctant staff due to lack of water, electricity, naxalite prone area
These Agents are called Business Correspondents/ Business

Facilitators
40
Who are Business Correspondents?
Business Correspondents are Bank Representatives.
They help mainly villagers to open bank accounts.
They help villagers in banking transactions. (Deposit money, Withdraw

money of savings account, loans etc.)
The Business Correspondent carries a mobile device.
The villager gives his thumb impression or electronic signature, and gets
the money.
Business Correspondents get commission from bank for every new

account opened, every transaction made via them, every loan-application
processed etc.
41
Self Help Group (SHG)
Self Help Group is a voluntary association of poor formed with the
common goal of social and economic empowerment.
Micro Finance through SHGs offers the best form of credit reaching the
unreached and the under-reached.
The members volunteered to organize themselves into a group for the

erodication of poverty of the members
They agree to save regularly and convert their savings into a common
fund known as corpus.
To mobilise the resources of individual members for their collective

economic development
42
Role of BCs / BFs
Create awareness about savings in banks small villages.
Help the villagers to open bank accounts.
Give advice to villagers, about how to arrange /manage loans which is

required to open small business or farming by them.
Collect loan applications, forward them to bank.
Preliminary processing of loan applications eg. verification of persons

identity, home-address etc.
Help the Self Help Groups (SHG), to get loans.
Help the bank to collect EMIs and recover loan money.
43
Role of BCs / BFs
He should give real and genuine information to farmers and others, on
various bank products and should not treat all customers alike and with
respect & dignity
Educating the prospective borrowers on the loan products available with

the bank and advising them of the one that suits them
Ensuring that the KYC norms have been complied
Post-sanction and pre and post disbursal verification and monitoring
Follow up for recovery
Establishments of Farmers Clubs
44
Who Can Be The Business Facilitators?
Organizations as Business Facilitators
Non Government Organizations Village knowledge Centres

(NGOs)
Farmers Clubs Agri Clinics and Agri Business
Centres
Community Based Organisations Krishi Vigyan Kendras
(CBOs)
Co-operative Societies KVIC Units
Post Offices KVIB Units
Insurance Agents IT Enabled Rural Outlets of
Corporate Entities
Farmers Service Societies Well Functioning Panchayats
45
Who Can Be The Business Facilitators?
Individuals as Business Facilitators

Primary School Teachers Members of LBOs
Secondary School Teacher Balwadi Workers
Members of NGOs Members of Farmers Service

Societies
Member of Self Help Groups Ration Dealers
Anganwadi Workers Shop keeper and Kirana Merchants
Primary Health Centre Staff Postal Staff eg. Post Masters,
Postman, Post Clerks
Municipal and Gram Panchayat Village Officer and his Staff
staff 46
Who Can Be The Business Correspondents?
Organizations as Business Correspondents
Non Government Organizations Companies registered under

(NGOs) section 25 of the Companies Act
1956
MFIs set up under Societies Acts. MFIs set up under Trust Acts.
Registered NBFCs not accepting Krishi Vigyan Kendras

Public Deposits
Registered Village Organisations KVIC Units
Post Offices KVIB Units
Insurance Agents Societies registered under Mutually
Aided Co-op Soc Act
47
Who Can Be The Business Correspondents?
Individuals as Business Correspondents
Registered Bank Employees

Ex-Servicemen
Retired Government Employees
48
Business Facilitator v/s Business Correspondent
The major difference between the Business Facilitator and Business
Correspondent is that Business Correspondent is allowed to handle
small-value cash transactions in centres where there is no bank
branch, which in the normal course may have to be performed in
the branch premises only
49
Awareness of BFs /BCs about Banking Operations
Savings A/c including No-frills A/c

Term Deposits
Deposit Reinvestment Certificates
Monthly Income Deposits
Recurring Deposit Accounts
Add-on features of deposit Accounts
Insurance Linked Deposits
Pre mature closure / extension of deposits
Calculation of Interest on Deposits and Payments
KYC Norms for Account Opening
Kisan ATMs
50
Awareness of BFs /BCs about Loans & Advances
Short term advances to Agriculture :
For Cultivation of Crops
Scale of Finance
Disbursement of Stages
Marketing of Produce
Recovery of loan
Kisan Credit Cards
Cash Credit system for Agricultural lending
Financing of Sugarcane growers under tie-up arrangement with sugar
factories
Loan against hypothecation/pledge of agricultural produce (including
ware-house receipts)
51
Medium term Loans / Advances to Agriculture

For Minor Irrigation
For digging/deepening of wells
For sprinkler/drip irrigation systems
For Land Reclamation
For Land Development
For Land levelling
For Bunding etc
For purchase of Farm Machinery and Equipments
For Purchase of Harvest Combines
For Purchase of Tractors and Power Trillers
For Purchase of other equipments
Bio-Gobar Gas Plant
52
Medium term Loans / Advances to Agriculture

For other Allied Products
Dairy Farming
Poultry Farming
For Piggeries
For Sericulture
For Bee keeping
53
Long term loans for construction / setting up of :

Warehousing and Godown facilities
Cold storage facilities
Agri-clinics/Agri-business Centres
Agro service Centres
Farmers Service Societies
Cultivation of Fruit Crops
Floriculture Venture
Cultivation of Medicinal Herbs
Gold Loans
54
Checking and controlling of BCs / BFs
Banks can install proper and effective checks and balances system in
place to counter various risks faced by banks in engaging the BCs
and BFs
All Loan applications must be submitted to the branch (KYC
complied)
BCs and BFs should not commit the sanction beforehand
Post sanction inspection can be carried out by banks after
disbursements of loans
Feed back system is developed to ensure the quality of service
The branch official carry out surprise checks to verify the
bonafides of the borrower
55
Ethics to be observed by BCs / BFs
Public Trust and Customer Confidence are the major scores on which
the banks build their reputation
To maintain this, the BCs and BFs also have to observe ethics
Give complete, factual and truthful information of the bank on
various products and other aspects
Protect and respect the privacy of the customer
Should not compromise his personal interest with that of the bank
Should treat all customers alike and with respect and dignity
Should not differentiate or compare one customer against the other
Should not hurt any caste or communal feelings
56
Technical Knowledge
IT solutions for making banking facilities available at the door step
of the rural customers is not only viable but also holds the potential
of scalability
Banks use smart cards, with biometric identification, for opening
and operating bank accounts
Use of smart cards along with mobile or hand held devices ensure
that the transactions are recorded in the banks books on real time
basis
Some of the State Governments are routing Social Security
payments and also payments through National Rural Employment
Guarantee Scheme (NREGS) through Smart Cards
Public & Private Sector banks have made huge initiatives towards IT
Enabled Financial Inclusion using BC / BF Model for reaching the
unreached
57
58
Composite Hand Held Device
Receipt
Generation Slot
Slot to Insert
Operator/Customer
card
Slot to Capture
finger print
59
Bio Metric Card
A plastic card having memory of all bio-metric data of finger impression
(thumb/index) of a customer and his/her accounts which is secure and
user friendly.
There is photo on the face of the card and card number and logos of
sponsoring banks.
Customer need not remember PIN numbers and gives abundant

security to all (literates as well as illiterates).
The card has all the information of the account of customer and can be
read through the card reader offline.
It enables banks to reach the unreached at an affordable cost with

branchless banking concept.
60
Financial Education for BCs / BFs
Knowledge : knowledge on finance and financial products is the key to
helping people make informed decision.
Developing Understanding: developing a strategy for dealing with

financial information which includes skills for budgeting, planning,
understanding the types of products and shopping around to find the
best deal.
Building confidence: skill and confidence is necessary to clarify

complaints and queries of customers. Banks can expand client base
significantly through knowledgeable BCs / BFs and open up scope for
ample of Cross Selling of other Financial Products.
61
Cross - Selling
Selling multiple products to the customers already having banking
relationship with the branch.
Cross selling results in win-win situation both for the bank and the
customer.
The clients who are provided with Loan Accounts, No Frill Accounts can
be reached to sell saving products such as Bank Deposits (Fixed
Deposits, Recurring Deposits etc.), Mutual Funds, Insurance Products.
62
Borrower Profiling
Check list of Questions will help the counsellor (BC / BF) in identifying
the prospective borrowers and determining the suitability of activities
chosen by them for bank finance
For Agricultural Loans

Whether farmer has necessary land
Whether it is contagious or fragmented
Whether the crops proposed are generally cultivated in the area
Farmers experience in cultivation of the crop
Whether farmer has adequate tilling equipments/implements
Whether irrigation facilities available or is the land rain fed
Suitability of cropping pattern
63
Borrower Profiling
For Minor Irrigation:
Whether underground survey is carried-out in the area

Whether digging of new wells permitted in the land owned by
the farmer
Whether adequate area of land available for sustainable
irrigation
Availability of diesel / power for energizing the well
64
Borrower Profiling
For Dairy Farming
Adequate accommodation for animals proposed
Availability of Fodder and feed in the area and their source
Marketing arrangements for milk and milk products
Availability of veterinary assistance
For Poultry Farming

Whether the proposed site is ideally located
Suitability of land and climate
Water supply
Availability of veterinary assistance
Availability of poultry feed
Availability of market for eggs and birds
65
Borrower Profiling
For Tractor Loan
Size of land-holding
Whether it is contiguous or fragmented
Demand for tractor (hire) in the neighbourhood
Availability of facilities for repairs and servicing of tractor
For Small Traders and Small Business

Whether borrower has sufficient knowledge of and experience in
the business
Suitability of the area for the business proposed
Availability of proper infrastructure
Source of procurement
66
CLASSIFICATION OF ADVANCES TO
AGRICULTURE AND OTHER SECTORS
67
Agriculture Direct Finance
Finance to individual farmers including Self Help Group i.e. Groups
of individual farmers for Agriculture and Allied Activities (Diary,
Fishery, Piggery, Poultry, Bee-keeping etc.)
Short term loans for raising crops, i.e. for crop loans. This will
include traditional/non traditional plantations and horticulture.
Advances upto 10 lakhs against pledge/hypothecation of
agricultural produce (including are house receipts) for a period
not exceeding 12 months irrespective of whether the farmers
were given crop loans for raising the produce or not.
Working capital and term loans for financing production and
investment requirement for agriculture and allied activities.
68
Agriculture Direct Finance
Direct Finance
Loans to small and marginal farmers for purchase of land
for agricultural purposes.
Loans to distressed farmers indebted to non

institutional lenders, against appropriate collateral or
group security.
Loans granted for pre-harvest and post harvest

activities such as spraying, weeding, harvesting, grading
sorting, processing and transporting undertaken by
individuals, SHGs and co-operatives in Rural areas.
69
Agriculture In-Direct Finance
Finance for Agriculture and Allied Activities-
Loans to food and agro-based processing units with
Investments in plant and machinery upto 10 crores ,
undertaken by those other than small farmers and
marginal farmers.
Credit for purchase and distribution of fertilizers
pesticides, seeds etc.
Loans upto Rs. 40 lakhs granted for purchase and
distribution of inputs.
For allied activities such as cattle feeds, poultry feeds.
Finance for setting up of Agri clinics and Agri business
centres.
70
Finance for Agriculture and Allied Activities-
Finance for hire purchase schemes for distribution of
agricultural machinery and implements.
Loans to farmers through Primary Agricultural Credit
Societies (PACS), Farmers Service Societies (FSS),
Large-sizes Adivasi Multi Purpose Societies (LAMPS).
Loans to co-operative societies of farmers for
disposing of the produce of members.
Financing the farmers indirectly through the co-
operative system (otherwise than subscription to
bonds and debentures).
71
Finance for Agriculture and Allied Activities
Loans for constructions and running of storage facilities (Warehouse,

market yards, godowns, and silos) including cold storage units
designed to store agriculture produce/products, irrespective of their
location
If the storage unit is registered as SSI unit/micro or small enterprise,

the loans granted to such units may be classified under advances to
small enterprises sector
Advances to Custom Service Units managed by individuals,

institutions or organizations who maintain a fleet of tractor, bull
dozers, well boring equipment, threshers, combines etc, and
undertake work for farmers on contract basis
72
Finance for Agriculture and Allied Activities -
Finance extended to dealers in drip irrigation/sprinkler
irrigation system/agricultural machinery, irrespective of
their location, subject to :
A dealer should be dealing exclusively in such items
or if dealing in other products, should be
maintaining separate and distinct records in respect
of such items.
A ceiling of Rs. 30 lakhs should be observed.
73
Loans to Arthias/ Adhatias (Commission Agents in rural and semi
urban areas functioning in markets /mandies) for extending credit to
farmers for supply of inputs as also for buying the output from the
individual farmers / SHGs.
50% of the credit outstanding under loans for general purposes

under General Credit Cards.
Loans to Non Banking Financial Companies (NBFCs)for lending to

individual farmers or their SHGs.
Loans granted to NGOs / MFIs for on-lending to individual farmers

or their SHGs.
74
Small Farmers Direct Finance
Manufacturing Enterprises
Small Manufacturing Enterprises
Enterprises engaged in the manufacture/production,
processing or preservation of goods and whose investment in
plant and machinery does not exceed Rs. 5 Crores.
Micro Manufacturing Enterprises

Enterprises engaged in the manufacture/production,
processing or preservation of goods and whose investment in
plant and machinery does not exceed Rs. 25 Lakhs,
irrespective of the location of the unit.
75
Service Enterprises
Small Service Enterprises
Enterprises engaged in the providing / rendering of services
and whose investment in equipment does not exceed Rs. 2
Crores.
Micro Service Enterprises

Enterprises engaged in the providing / rendering of services
and whose investment in equipment does not exceed Rs. 10
lakhs.
The small and micro service enterprises shall include small
road and water transport operators, small business
professionals, self employed persons and all other service
enterprises.
76
Khadi Village Industries Sector ( KVI):
All advances granted to units in the KVI Sector
irrespective of their
Size of operations,
Location,
Amount of original Investment in plant &
Machinery.
Such advances will be eligible for consideration under

the sub target (60%) of the small enterprises
segment within the priority sector).
77
Small Farmers In-Direct Finance
Persons involved in assisting the decentralised sector in the supply
of inputs to and marketing of output of artisans, village and cottage
industries.
Advances to co-operatives of producers in the decentralized sector

viz artisans village and cottage industries.
78
Finance for Retail Trade
Advance granted to retail traders dealing in essential commodities
(fair price shops) consumers co-operative stores.
Advances granted to private retail traders with credit limits not
exceeding Rs. 20 lakh.
79
Finance for Micro Credit
Loans of very small amount not exceeding Rs. 50000 per borrower
provided by banks either directly through a SHG/JLG mechanism or
to NBFC/MFI for on-lending up to Rs. 50000 per borrower.
Loans to distressed persons (other than farmers ) to pre pay their

debt to non institutional lenders, against appropriate collateral or
group security, would be eligible for classification under priority
sector.
80
Finance for Education
Educational Loans granted to individuals for educational purposes
upto Rs. 10 lakhs for studies in India and Rs. 20 Lakhs for studies
abroad. Loans granted to institutions will not be eligible to be
classified as priority sector advances.
Loans granted by banks to NBFCs for on - lending to individuals for

educational purposes upto Rs. 10 lakh or studies in India and Rs. 20
lakhs for studies abroad.
81
Finance for Housing
Loans upto Rs. 20 lakhs irrespective of location, to individuals for
purchase / construction of a dwelling unit per family, excluding
loans granted by banks to their own employees.
Loans given for repairs to the damaged dwelling units of families

upto Rs. 1 lakh in rural and semi urban areas and up to Rs. 2
lakhs in urban and metropolitan areas.
Assistance given to non governmental agency approved by the

NHB for the purpose of refinance for construction/reconstruction of
dwelling units or for slum clearance and rehabilitation of slum
dwellers, subject to a ceiling of loan component of Rs. 5 lakh per
dwelling unit
82
Finance for Weaker Sections
Small and marginal farmers with land holding of 5 acres and less and
landless labourers, tenant farmers and share croppers.
Artisans, village and cottage industries where individual credit limits do
not exceed Rs. 50000.
Beneficiaries of Differential Rate of Interest (DRI) Scheme.
Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY).
Scheduled Castes and Scheduled Tribes.
Beneficiaries under the scheme for liberation and Rehabilitation of
Scavengers (SLRS).
Advances to Self Help Groups.
Loans to distressed poor to prepay their debt to informal sector against
appropriate collateral or group security.
83
BCs / BFs
As of March 2013 there are approx 1,95,000 Business Correspondents

and Business Facilitators; have taken banking to 2.2 lakhs villages
84
Summarize
ROLE OF A
BUSINESS CORRESPONDENT / BUSINESS
FACILITATOR IN VILLAGES
(To be competent, the user/individual on the job must
be able to..)
85
Assist with
Source New
Application
Customers
Process
Facilitate/Execute Provide On-

Transactions Going Services
86
Source New Customers
87
Operations
Segment prospective customers according to demographics for area assigned (villages, rural remote
areas etc.)
Assess demand for various products offered according to segments (housewives, farmers etc.)
Approach prospective customers through various methods including door-to-door calls and community
gatherings to create awareness about banking and the banks products
Arrange campaign/ educational activities on behalf of the banks to inform potential customers about
products offered.
Discuss with customer to ascertain basic goals and financial needs.
Assess prospective customers financial status (income, dependents etc.) and current trend of cash
flows
Suggest appropriate products according to life-cycle needs and income such as agricultural
loans/savings plans etc.
Explain to the prospective customer, the terms and conditions of product, application procedure,
documents required and timelines for processing the application
Respond to all queries and concerns regarding products and application process
88
General / Administrative
Update details of customers acquired and status into information

system/records.
Prepare and submit periodic reports on status of acquired customers

to supervisor/ manager
Discuss and set revenue/account targets with supervisor/manager if

applicable
Prepare reports on targets achieved and review future targets.
89
Knowledge of the organization and its processes
Standard operating procedure and guidelines for performing the BC/BF function
Organizational guidelines for delivering marketing merchandise and marketing

procedures
Banking regulations relevant to the products offered by the BC / BF
Types of documents required for applications including KYC forms, acceptable options
of identity & address proof and other supporting documents
Processes and methods of acceptable payments as stipulated by organization
Risk compliance and risk associated with various products.
Types of customer segments and their suitability to products offered
Methods to map prospective customers needs to products offered by organization
Procedure for assisting customers with application forms and processing policies
Security procedures for handling sensitive customer information
Routes and schedule for visiting areas assigned to the BC/BF

90
Technical Knowledge
Products offered by other financial provides including other banks,
NBFCs, money lenders etc.
Banks objectives, its role, functions and structure
Maintenance and operating procedure for using equipment provided
by bank such as POS (Point of Sale) machines, computers etc.
IT skills and operating procedures to update status of leads,
prospective customers, if applicable.
Procedure for digitally updating customer details, if required.
Marketing techniques for the banking sector when hosting
campaigns
Factors that impact the creditworthiness of the customer.
Basic economic, accounting and financial concepts such as interest
rates, profit/loss etc.
Basic accounting techniques for recording transactions if required
91
Core Skills/ Generic Skills
Writing Skills
Prepare reports and summary of the documents for review.
Prepare reports on status of leads and prospective customers
Reading Skills
Read and understand organizational and regulatory guidelines
Read and verify legitimacy of documents submitted by prospective customers
Read and explain terms and conditions of various bank products to prospective
Integrity
Maintain integrity with respect to customers time, sensitive documents
Act objectively and in the best interests of customers
Mathematical Skills
Compute numbers quickly and accurately.
Perform basic mathematical operations such as addition, subtraction, multiplication
and division
Oral Communication (Listening and Speaking skills)
Listen to the customers and be able to offer products that are pertinent to their
requirements.
Communicate clearly with the customer using language that he/she understands.
Communicate and share knowledge with peers and supervisors.
92
Professional Skills
Decision Making
Determine what Banking Product is best for the customer based on needs assessment & financial
status of the customer.
Make clear, logical decisions and portray confidence to the customers.
Plan and Organize
Plan appointments with prospective customers; be prepared with appropriate plans prior to the
meeting.
Organize work & time in order to maximize productivity
Customer Centricity
Make decisions taking into account customers best interests
Focus on developing long term customer relationships
Follow-up and provide support services consistently
Problem Solving
Address problems arising either due to a technical issue, customer grievance or administration
related issues and escalate those issues beyond ones role
Analytical Thinking
Assess customers financial status and understand their financial capacity for the appropriate
product
Draw insights from prospective customer interaction and refine marketing technique
Motivation
Be self driven, take initiatives and deliver results set by the organization and respective superiors
Critical Thinking
Consistently obtain feedback and improve their performance
Exercise judgment in unforeseen situations which preserve company values and are in line with
organizational guidelines 93
Assist with
Application Process
94
Operations
Provide customer with forms needed & assist customer in filling application forms, if
required
Obtain necessary documents required for processing of the account opening

application
Perform basic verification & ensure that the primary information details shared are
legitimate.
Pursue referrals enquiring about the past records/business of the customer to ensure
safety of dealing with the customer
Receive all required documents and forms duly filled and signed/thumb printed by
customer and attach it into the application file, if any
Upload documents/information received into computer system/smart device (kiosk,

point-of-sale unit etc.) if applicable.
For loan accounts, collect the additional documents required
Clarify payment mechanisms & conditions, prepare payment schedule if required

95
Operations ... (Contd.)
Deliver application file/the documents collected from the customer
to the assigned bank branch
Assist bank with any further information, if required, for processing
of application.
Receive notification from bank regarding status of the application
Inform customer if the application is accepted/ rejected or if another
account category has been assigned, with reasons for the same as
provided by the bank
On successful account opening, deliver the relevant documents and
materials provided by the bank to the customer including pass book,
smart card if provided etc.
Explain the documents & materials provided by bank- demonstrate
methods to use them and their functions to the customer.
Plan future follow-up visits
96
Knowledge of the organization and its
processes
All products and services details with exceptions offered to customers
situated in rural areas.
The roles and responsibilities of the job - the bank's expectation of the
role
The regulatory system that governs banks and their impact on
procedures.
Requirements for KYC Norms, acceptable options of identity & address
proof, supporting documents required and other identification
procedures.
Escalation matrix in the case application is rejected.
The organizations' accepted methods of payment & their respective
processes.
Methods through which suitable products and services are
recommended to prospective customers.
97
Knowledge of the organization and its
processes... (Contd.)
Methods to calculate interest & principal amounts for loans
repayment.
Modes of payment available to the customer.
List of supporting documents required with specifics.
Procedure for assisting customers with application forms and
processes.
The organizations policy of privacy & discretion when dealing with
customers personal information.
All relevant legal procedures involved in application.
Methods to format data and information required for reporting on
customer base.
98
Technical Knowledge
Types of products offered and details of the same
Products offered by other financial provides including other banks, NBFCs,
money lenders etc.
Banks objectives, its role, functions and structure
Maintenance and operating procedure for using equipment provided by bank
such as POS (Point of Sale) machines, computers etc.
IT skills & operating procedures to update status of A/cs acquired, A/c details
Marketing techniques for the banking sector when hosting campaigns
Basic economic, accounting & financial concepts such as interest rates,
profit/loss.
Basic accounting techniques for recording transactions if required.
The information available in supporting documents such as pamphlets, fliers,
manuals, terms and conditions documents etc.
Methods to evaluate life & wealth cycle of each customer when working on a
financial plan
99
Writing Skills
Reading Skills
Integrity
Mathematical Skills
Perform basic mathematical operations such as addition, subtraction,
multiplication and division
requirements.
Communicate and share knowledge with peers and supervisors. 100
Professional Skills
Decision Making
Plan and Organize
meeting.
Customer Centricity
Problem Solving
Address problems arising either due to a technical issue, customer grievance or administration related
issues and escalate those issues beyond ones role
Analytical Thinking
Assess customers financial status and understand their financial capacity for the appropriate product
Motivation
Critical Thinking
Exercise judgment in unforeseen situations which preserve company values and are in line with 101
organizational guidelines
Facilitate/Execute
Transactions
102
Organizational Context
Standard operating procedure and guidelines for performing the
correspondents function, if applicable
Banking regulations relevant to the products offered by the BCs
Processes and methods of acceptable payments as stipulated by
organization
Risk compliance and risk associated with various products
Procedure for the loan application process and documents required
Termination procedure and documents required for the same
The limit/restriction on transaction amount per day and per operation
Security procedures for handling sensitive customer information.
All relevant laws and regulatory procedures
Methods to format data and information required
Organizations policy on maintaining inactive accounts
Escalation matrix in the case of customer grievances.
Point of contact in base branch to direct any queries.
The procedure of resolving customer grievance issues.
103
Technical Knowledge
NBFCs, money lenders etc.
Maintenance and operating procedure for using equipment provided by
bank such as POS (Point of Sale) machines, computers etc.
Procedure for conducting transactions such as cash deposits,
withdrawals, Dr/Cr transactions with equipment provided or manually
(kiosk, point-of-sale machine)
Procedure for updating transactions & depositing cash collected with
bank branch
IT skills and operating procedures to update transactions, if applicable.
Basic economic & financial concepts such as interest rates, profit/loss
etc.
Basic accounting principles required to record bank transactions, if
required. 104
Writing Skills
Reading Skills
Integrity
Mathematical Skills
Perform basic mathematical operations such as addition, subtraction, multiplication and
division
requirements.
105
Professional Skills
Decision Making
Determine what Banking Product is best for the customer based on needs assessment & financial status
of the customer.
Plan and Organize
Plan appointments with prospective customers; be prepared with appropriate plans prior to the meeting.
Customer Centricity
Problem Solving
issues and escalate those issues beyond ones role
Analytical Thinking
Motivation
Critical Thinking
Provide On-Going
Services
107
Operations
Schedule and execute follow-up visits with customer to periodically
review customers financial requirements.
Provide post-sale customer services such as delivering forms for
address, collecting payments, setting-up updates/reminders etc.
Respond to all customer queries/complaints.
Advise customer on managing their account according to needs.
Inform and advise customer of new products and services that may
be of additional value
Escalate all queries and grievances beyond ones role to
supervisor/manager
Obtain list of defaulters/ default loan accounts from bank branch
Assist with payment recovery in case of defaulted loans to the
maximum extent possible
Report status of loan recovery to bank branch supervisor/manager
108
General / Administrative
Update details of payments collected into records/information system
Prepare periodic reports on status of acquired customers, account

status etc. to supervisor/Manager
Discuss and set performance targets with supervisor/manager
Prepare reports on targets achieved and review future targets
Follow security procedures when handling Cash handling, Cheques,

customer confidential details etc.
109
Knowledge of the organization and its processes
Types and features of all products and services offered to targeted customers
Standard operating procedure & guidelines for performing the BCs/BFs function
Organizational guidelines for delivering marketing merchandise and marketing
procedures
Banking regulations relevant to the products offered by the BCs/BFs
Types of documents required for closure of accounts including KYC forms,
acceptable options of identity, address proof and other supporting documents
Processes and methods of acceptable payments as stipulated by organization
Types of customer segments and their suitability to products offered
Methods to map prospective customers needs to products offered by
organization
Procedure for assisting customers with application forms & processing policies
Security procedures for handling sensitive customer information
Routes and schedule for visiting areas assigned to the BCs/BFs
110
Technical Knowledge
NBFCs, money lenders etc. Banks objectives, its role, functions and
structure
Maintenance and operating procedure for using equipment provided by
bank such as POS (Point of Sale) machines, computers etc.
IT skills and operating procedures to update status of leads,
prospective customers, if applicable
Marketing techniques for the banking sector when hosting campaigns
Basic economic & financial concepts such as interest rates, profit/loss
etc.
Basic accounting principles required to record bank transactions, if
required.
111
Writing Skills
Reading Skills
Integrity
Mathematical Skills
Make fast calculations while considering options.
Assess the impact on customer as and when a change occurs
requirements.
112
Professional Skills
Decision Making
Plan and Organize
meeting.
Customer Centricity
Problem Solving
issues and escalate those issues beyond ones ro
Analytical Thinking
Motivation
Critical Thinking
THANK YOU
114

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Banking Correspondent & Business

Facilitator Training Program

Copyright 2011 National Stock Exchange of India Ltd.

An establishment authorized by the Government to

Banks can either be classified as Commercial or Co-

Commercial Banks Co-operative Banks

Public Private Foreign Regional Local Area Urban Agri

Private Sector Banks : In these types of banks, the majority of share

Regional Rural Banks : Regional Rural Banks (RRBs) were

Urban Co-op Banks: The term Urban Co-operative Banks (UCBs),

Land Development Banks (LDB): The long-term finance required by

One of the most important functions of any commercial bank is to accept

Safety of deposits : At the time of depositing money with the bank, a

Demand deposits : are defined as deposits payable on demand through

When money is advanced by bank (known as loans and

Fixed & Floating

INTEREST = PRINCIPAL X RATE OF INTEREST X TIME

Interest = Total Amount of Interest Paid

Solution: Future value = 5,000 * ((1 + 0.10/4)^(4*3)) = Rs.6,724.45

Floating Rate of Interest Changes depend upon market condition.

Debtor Creditor (Bank is the Debtor & Customer is the Creditor)

Creditor Debtor (Bank is a Creditor & Customer is a Debtor)

Bailee Bailor (Bank is Bailee and Customer is a Bailee)

Agent Principal (Bank is Agent and Customer is Principal)

Lessor Lessee (Bank is a Lessor and Customer is Lessee)

Trustee Beneficiary (Bank is a Trustee and Customer is Beneficiary)

Improved IT usage in banking transactions, where a face to face contact

Government of India has enacted, in the year 2002, Prevention of

Placement : It means physical disposal of proceeds of criminal

Layering : It means separation of illicit proceeds from their source

Integration: This is the final phase in which such moneys are

Banks cannot identify the sources of funds at first step itself

KYC procedure is important for both types of transactions i.e. Deposit

Banks are required to know the actual identity of the customer

An Account Opening Form is filled by the Customer which contains

Customers are divided into various categories based on the risk

There can be different Categories of A/c Individual, Joint Holders,

Customer Identification should be reliable source. The acceptable list as

Driving Licence Voter Identity Card

Identity Card issued by the Employer, if

The main source of funds for a banker for lending or investments is

Banks extend credit to different categories of borrowers for a wide

The business of lending is not without certain inherent risks,

The main Principles of lending are as follows :

The loan policy outlines lending guidelines and establishes operating

Level of credit-deposit ratio

Directed credit stipulations

Advances can be broadly classified into:

Fund-Based Lending : This is a direct form of lending in which a loan

Non-Fund Based Lending : In this type of facility, the Bank makes no

Working Capital Finance

Financial Inclusion is the delivery of Financial Services by the formal

financial system at an affordable cost to low income groups.

It includes provisions for savings, loans, insurance payments and

Eg. farmers, landless labourers, share croppers, women workers in

unorganized sectors etc.

Banks have started using innovative methods in approaching the

Financial Financial Affordable

Need of an Agent between Banks and

Volume of business is very Low

These Agents are called Business Correspondents/ Business

They help mainly villagers to open bank accounts.

They help villagers in banking transactions. (Deposit money, Withdraw

The Business Correspondent carries a mobile device.