Business Correspondent Framework: RBI Draft Two-Tier Model
Why in the news
The RBI released a draft to overhaul how bank agents and branches are defined. The aim is a simpler, more reliable structure for last-mile banking, with the Business Facilitator category folded into the Business Correspondent system.
Key facts
- Effective date proposed: July 1, 2026; transition deadline for existing entities: September 30, 2026.
- The Business Facilitator (BF) model is abolished; every BF must be re-classed as BC-BO or BC-BT.
- A place with a bank branch or a BC-BO is no longer an Unbanked Rural Centre (URC).
- Foreign bank subsidiaries: same rules as domestic SCBs, but need prior RBI approval for outlets in centres sensitive for national security and cannot use BC-BTs there.
| Category | Nature | Banking Outlet? |
|---|---|---|
| BC-BO (Banking Outlet) | Fixed-location point run by a BC agent for a bank; regular basic services; mini branch in remote areas | Yes |
| BC-BT (Banking Touchpoint) | Any service point, such as a small shop or mobile agent, fixed or not; basic transactions and lead generation | No |
The “4-5 Rule” for a branch
- Fixed, permanent unit.
- Run by bank employees.
- Open at least 4 hours a day.
- Open at least 5 days a week.
Background
- Business Correspondent: external agent engaged by a bank to serve places without a branch, where a full branch is not viable.
- URC: tier-5 or tier-6 centre with no branch of any scheduled commercial bank.
- BFs earlier focused on facilitation, such as lead generation, while BCs could handle cash; their overlap led to the merger.
- Self-service channels (ATMs, CDMs, kiosks) are excluded from outlets.
Exam angle
- Remember: BC-BO is an outlet, BC-BT is not; BF model scrapped.
- Related terms: financial inclusion, last mile, URC.
- Important for RBI Grade B and banking PO/Clerk awareness.