Banking correspondents · field networks
A bank counter in the corner shop, and the bank still answerable
Business correspondents take banking to villages and neighbourhoods without branches. The model works through thousands of local agents, and it rests on one rule: whatever the agent does, the bank is responsible for it. Running a network well means building everything around that.
- Kirana storeCash deposits and withdrawals
- PharmacySmall remittances
- Common service centreAccount opening support
- Petrol pumpLoan repayments
- Self-help groupGroup savings collection
- Village agentBalance enquiries
What the BC model is for
RBI permitted banks to use business facilitators and correspondents from 2006, with the aim of financial inclusion: extending banking to people and places that branches don't reach. In 2010 it widened who could act as a correspondent to include companies, alongside individuals such as shop owners, retired bank staff and teachers, and organisations such as NGOs and self-help groups.
The activities are “within the normal course of the bank's banking business”, but carried out at places other than the bank's premises and ATMs. For a customer, that means depositing or withdrawing cash, sending money home or repaying a loan at a shop down the road, instead of a branch a bus ride away.
| Party | Role |
|---|---|
| Bank | Offers the banking services, holds the accounts, and is responsible for the BC and its agents |
| Corporate BC | Engaged by the bank; runs the network of outlets or agents under a written agreement |
| Agent or retail outlet | Serves customers at the counter: a shop, service centre or individual agent |
| Technology provider | Devices, apps and systems linking agents to the bank; may be the BC itself or a third party |
What agents can do
RBI's 2010 guidelines listed the activities banks may give their correspondents. The bank decides which it actually offers through its network, and on which devices.
Savings
Collecting small-value deposits; creating awareness about savings and other products.
Credit
Identifying borrowers, collecting and pre-processing loan applications, disbursing small-value credit.
Repayments
Collecting principal and interest; follow-up for recovery; post-sanction monitoring.
Remittances
Receiving and delivering small-value remittances and other payment instruments.
Groups
Promoting, nurturing and monitoring self-help, joint liability and credit groups.
Other products
Selling micro insurance, mutual fund, pension and other third-party products.
From RBI's guidelines of 28 Sep 2010 (para 4). KYC and anti-money-laundering compliance under the BC model remains the bank's responsibility.
The rules the whole model rests on
RBI's guidelines set a small number of principles that shape every BC programme. Details have been revised over the years, but these are the ones a programme is designed around.
The bank is responsible
Banks are fully responsible for the actions of their BCs and retail outlets or sub-agents, and customer agreements say so.
A written, vetted agreement
The bank–BC contract is carefully defined in writing and legally vetted, following RBI's outsourcing guidelines.
Cash handled on the bank's behalf
Agreements set limits on cash held by intermediaries and on individual payments and receipts; cash taken is receipted on behalf of the bank.
End-of-day accounting
Offline transactions are accounted for and reflected in the bank's books by the end of the day.
No direct fees from customers
The BC is prohibited from charging customers directly for services it provides on the bank's behalf.
Confidential data
Banks must protect customer information held by BCs; a BC serving several banks keeps each bank's data separate.
From RBI's guidelines of 28 Sep 2010, since revised in places. Each bank's board-approved BC policy governs its own programme. A summary, not legal advice.
Choosing and onboarding agents
A network is only as good as its agents. RBI's guidelines ask banks to carry out due diligence before engaging correspondents, looking at reputation and standing, financial soundness, management, cash-handling ability and ability to use the technology.
For a corporate BC recruiting hundreds of agents, that becomes a repeatable process: the same checks, the same training and the same starting limits for everyone, with room to raise limits as an agent proves reliable.
- 1ScreenIdentity, premises, reputation locally, and the shop's own finances.
- 2AgreeA written agreement setting services, limits, commission and conduct.
- 3TrainProducts, the device, fraud awareness and customer rights, in the local language.
- 4EquipDevice, signage showing required details, and a starting float.
- 5Start smallLow limits and close monitoring for the first weeks.
- 6ReviewPerformance, complaints and accounting, at least annually and usually far more often.
Cash and float: the daily balancing act
An agent needs two kinds of money to serve customers: physical cash in the drawer for withdrawals, and a balance with the bank (often called float) to credit customers' accounts for deposits. Every deposit turns the agent's cash up and float down; every withdrawal does the opposite.
If either runs out, the agent turns customers away. Agents in areas where people mostly withdraw run short of cash; those where people mostly deposit run short of float. Rebalancing (moving money between cash and float, usually through a nearby branch or a network arrangement) is one of the main jobs of whoever manages the network.
One agent's morning
| Transaction | Cash in drawer | Float with bank |
|---|---|---|
| Opening | ₹40,000 | ₹60,000 |
| Deposit ₹5,000 | ₹45,000 | ₹55,000 |
| Withdrawal ₹12,000 | ₹33,000 | ₹67,000 |
| Withdrawal ₹8,000 | ₹25,000 | ₹75,000 |
| Deposit ₹3,000 | ₹28,000 | ₹72,000 |
Made-up amounts. The total stays ₹1,00,000; only its form changes. Here cash is draining, so the agent will need to rebalance before the afternoon.
Technology at the counter
An agent's device is the bank's branch for that customer. RBI's 2010 guidelines asked banks to ensure the equipment and technology used by correspondents are of high standards, and in practice that means devices that authenticate customers reliably, work on weak networks, and give a receipt every time.
Common set-ups include a handheld terminal with a card reader and printer, a biometric scanner for customer authentication where the bank offers it, or a smartphone app with a connected printer. Whatever the device, the transaction has to reach the bank's books, and the customer has to leave with proof.
| Need | Why |
|---|---|
| Authenticate the customer | The bank must know who is transacting |
| Work on weak connections | Rural networks drop; transactions must not be lost or doubled |
| Print or send a receipt | The customer's proof, issued on the bank's behalf |
| Show the agent's balances | So cash and float can be managed |
| Log everything | For monitoring, reconciliation and disputes |
A day at an agent outlet
For the agent, BC work sits alongside running a shop. A programme that fits into that day keeps agents active; one that fights it loses them.
- 01
Open
Check cash in the drawer and float with the bank; top up if a busy day is expected.
- 02
Serve
Deposits, withdrawals, remittances and repayments between shop customers.
- 03
Rebalance
Mid-day, if cash or float is running low.
- 04
Close
Count cash, check the day's summary on the device, keep receipts.
- 05
Report
Transactions already in the bank's books; exceptions raised with the BC's support.
Customer education is part of the job
RBI's guidelines described financial literacy and customer education as an important part of the BC model, with banks encouraged to educate customers in local languages and to publish information about the correspondents they engage on their websites.
For a network, that turns into simple, repeated messages at the counter: how to check a receipt, that the bank's charges are the only charges, never to share a PIN or OTP, and where to complain.
Check the receipt. Amount, account and date, before leaving the counter.
Only the displayed charges. Nothing extra to the agent.
Never share a PIN or OTP. Not even with the agent.
Know where to complain. The bank's grievance officer, shown at the outlet.
Designing commissions that don't backfire
Agents are paid by commission, and how it's designed shapes their behaviour. RBI's 2010 guidelines were specific: banks may pay a reasonable commission or fee, reviewed periodically; it shouldn't be driven merely by the number of customers or transactions; it should combine fixed and variable parts, with the variable part depending partly on customer satisfaction; and part of it could be deferred or clawed back if things go wrong.
| Design | Encourages | Risk |
|---|---|---|
| Per transaction only | Volume | Split or unnecessary transactions; pushing products |
| Fixed only | Staying open | Little reason to serve well |
| Fixed plus variable, linked to quality | Steady service that customers value | Needs a way to measure quality |
| Part deferred or clawed back | Care with sales that could be mis-sold | More complex to explain to agents |
Protecting customers at the counter
Many BC customers are new to banking, and the counter is the only part of the bank they see. RBI's guidelines asked for information to be displayed at each outlet and for services not to be tied to buying the shop's own products. Banks must also publicise how to complain, and the bank's grievance officer, with RBI's ombudsman as the escalation if the bank doesn't resolve a complaint.
What the outlet shows. That it's the bank's BC, the name of the BC, the base branch's phone number, the ombudsman, and the fees for all services.
What the customer gets. A receipt for cash, issued on the bank's behalf.
What's not allowed. Tying banking services to buying the shop's products; the BC charging its own fees.
Where to complain. The bank's grievance officer, publicised; then RBI's ombudsman.
Monitoring and fraud
A network spread across thousands of outlets needs monitoring built into the system, not left to visits alone. RBI expects banks to review BCs regularly, visit outlets and speak with customers. Patterns in the transaction data usually show problems first.
Unusual volumes
An agent whose transactions jump, or cluster just below limits.
Repeated failures
Many failed transactions for the same customers can signal misuse of their identity.
Complaints
Any complaint naming an agent is investigated, not just logged.
Dormant then busy
Agents inactive for months who suddenly transact heavily.
Measuring a network's health
Counting agents says little. A network with thousands of registered agents can have most of them idle. The useful measures are about activity, reliability and the customer's experience, tracked by outlet and by area.
| Measure | What it shows | Watch for |
|---|---|---|
| Active agents | Share of agents transacting in a period | Large numbers registered but idle |
| Transactions per active agent | Whether outlets are useful to customers | Very high counts at one outlet (possible misuse) |
| Failed transaction rate | Device, network and process reliability | Rising failures in an area |
| Cash-outs refused for lack of cash | Liquidity management | Repeated at the same outlets |
| Complaints per thousand transactions | Customer experience | Complaints naming an agent |
| Agent churn | Whether the model works for agents | Agents leaving after a few months |
When an agent leaves or is removed
Agents close shops, move away or are removed for poor conduct. RBI's guidelines expected banks to have a business continuity plan so service continues uninterrupted if an agency arrangement with a company or sub-agent ends.
A clean exit settles the agent's float and cash, recovers the device and signage, disables access at once, and tells customers where they can go instead.
- 1Disable accessThe device and credentials stop working immediately.
- 2Settle balancesFloat and cash reconciled; commission paid or recovered.
- 3Recover equipmentDevice, printer, signage.
- 4Tell customersThe nearest alternative outlet or branch.
What “programme management” covers
Running a correspondent network is operations more than technology. The systems help, but the work is recruiting, training, rebalancing, settling commissions, answering agents' questions and chasing exceptions every day.
| Function | Day to day |
|---|---|
| Agent lifecycle | Onboarding, training, limits, deactivation |
| Liquidity | Watching cash and float, arranging rebalancing |
| Transactions | Monitoring, exceptions, failed-transaction follow-up |
| Commissions | Calculating and paying agents, handling disputes |
| Compliance | Records, outlet displays, audits, reports to the bank |
| Support | A helpline for agents and a route for customer complaints |
Where Peneu fits
This page doesn't say Peneu is a business correspondent for any bank, or that it runs agent networks. Whether Peneu provides any technology or services to banks or corporate BCs, for which of the functions above, is confirmed during onboarding. For how regulated partners and platforms divide responsibilities more generally, see the banking-as-a-service guide.
BC programme questions
What is a business correspondent?
A person or organisation a bank engages to provide banking services on its behalf at places other than its branches and ATMs, usually a local shop, service centre or agent. RBI introduced the model to take banking to people and places branches don't reach.
Who is responsible if a BC agent makes a mistake?
The bank. RBI's guidelines say banks are fully responsible for the actions of their BCs and their retail outlets or sub-agents, and customer agreements have to say that the bank is responsible to the customer for the BC's acts of omission and commission.
What services can a BC agent offer?
Whatever the bank permits within RBI's scope. RBI's guidelines list activities such as collecting small deposits, disbursing small loans, collecting repayments, receiving and delivering small remittances, helping with applications, and selling micro insurance, pension and similar products. Each bank decides which of these its correspondents offer.
Can a BC charge customers a fee?
RBI's guidelines say the agreement with the BC should prohibit it from charging customers directly for services it provides on the bank's behalf. Any charges are the bank's, shown at the outlet.
What is a corporate BC?
A company engaged by a bank as its business correspondent, which then runs a network of retail outlets or agents. It recruits and trains agents, provides the technology and handles day-to-day management, under its agreement with the bank.
Can a company be a BC for more than one bank?
RBI's guidelines allow a BC to work for more than one bank. Where a company is BC for several banks, customer data and account details for each bank must be kept separate, with no co-mingling.
What is agent float?
The balance an agent keeps with the bank or BC so it can credit customers' accounts when they deposit cash. Every deposit turns the agent's float into cash in the drawer, and every withdrawal does the reverse, so agents regularly need to rebalance.
Who reviews a BC's performance?
The bank. RBI's 2010 guidelines asked banks to review their BCs' performance in detail at least once a year, monitor them through controlling offices, and visit outlets and speak with customers periodically.
Are these rules current?
The rules quoted here come from RBI's 2010 guidelines on business correspondents, which RBI has revised in places since. Each bank's current policy, approved by its board, is what applies to its correspondents. Check the current position with the bank before relying on any detail.
Does Peneu run BC programmes?
This page doesn't say Peneu is a business correspondent or manages BC networks for any bank. Whether Peneu offers any services to banks or corporate BCs, and on what basis, is confirmed during onboarding.
Official sources
- RBI — Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs), 28 Sep 2010Eligible entities, scope of activities, bank responsibility, cash and accounting, commission, customer protection, data. Since revised in places.
Last reviewed . Examples, amounts and screens marked illustrative are not Peneu figures.