1. Business Correspondent Nupur Jha & Subit Saurav 01 April 2013 1

2. Overview Current Statistics Reasons for Financial Exclusion Regulatory Mandate KGFS viz-a-viz Traditional BC Existing Partnership Arrangement Win-win scenario 2

3. Current Statistics- Banking Scenario 1.Excluded from the ambit of banking services - approximately 145 million 2.Only 55 per cent of people have bank accounts 3.Only 9 per cent have borrowings from the banks – with only one bank branch servicing per 14,000 people 4.More than 80 per cent of the population do not have access to credit or life insurance cover 5.95 per cent have no general insurance 6.98 per cent of population does not participate in the capital market 7.On an average, there is one bank branch for every 19 villages 3 http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/FIC060911DG.pdf http://dqindia.ciol.com/content/top_stories/2012/112011804.asp

4. Reasons for Financial Exclusion Poor infrastructural set up High cost of operations Lower transaction volumes Lack of viable innovative operating models Unfamiliar market Inability to correctly assess risks 4

5. Regulatory Mandate 5 Service Area – BC’s can service clients only within a 30 km radius from the Bank's branch and in case of urban areas the radius should not be more than 10 km Transaction Records – All transactions undertaken through BC’s must be recorded in the books of the Bank by the end of working day KYC Norms – Know Your Customer (KYC) norms must be observed by the promoting Banks for all BC clients Key Components of the Regulatory Framework under BC Financial Inclusion Priority Sector Lending – Domestic Banks – 40% – Foreign Banks – increased to 40%

6. KGFS viz-a-viz a Traditional BC 6 Multiple Product Offering - including asset products Brick and mortar branch structure – physical branch Robust enrolment process – building customer database Seamless technology integration – enables real time transaction Knowledge management and in depth training procedure Know Your Customer( KYC ) process Wealth Management Approach - customer centric Credit Appraisal Process Portfolio performance monitoring expertise Risk sharing in between the BC and the Bank

7. Existing Partnership Arrangement Under the Direct Origination Model IRCS shall set up branches under the KGFS model that would serve as BC to the partner Bank The BC branches can deliver all the products of the Bank, including savings, deposits, payment services and loans to the remote rural customer household 7 KGFS Branch Location Criteria No private sector Bank branch in a 5 km radius No more than one state owned Bank branch in the service area A population of 10,000 within a 3km radius of the location, with each village in the service area not exceeding a population of 4,000 A minimum distance of 5km from the block headquarters The Bank (Tier 5|6 Location) BC Branch 1 BC Branch 2 BC Branch 3 BC Branch 4 BC Branch 5 BC Branch 6 BC Branch (Tier 6 locations * ) Village 1 Village 2 Village 3 Village 4 Village 5

8. Win-win scenario Banks – 100% PSL portfolio – Tier 5/6 market penetration – Greater reach – Better loan performance – Quick expansion – to bottom of pyramid Financial Institutions (BC) – Regular fund inflow – No exposure to interest rate risk – Low capital requirement KGFS – Full suite of financial products including Savings Account, RD and FD 8

9. Thank you IFMR Rural Channels and Services Private Limited IITM Research Park | A1 | 10 th Floor | Kanagam Village | Taramani | Chennai – 600 113 | Tamil Nadu | India http://ruralchannels.ifmr.co.in/ 9

10. Business Correspondent Model A major enabler of financial inclusion 10 Source: Financial Inclusion – Issues in Measurement and Analysis - Keynote Address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the BIS-BNM Workshop on Financial Inclusion Indicators at Kuala Lumpur on November 5, 2012.