What changed
Earlier, NBFCs were barred from acting as BCs; now non-deposit taking NBFCs can be appointed with conditions to avoid conflict of interest and forced bundling. The fixed distance cap of 30 km (rural/semi-urban/urban) and 5 km (metro) between BC outlets and base branches has been removed, giving banks operational flexibility.
What it means for you
Banks can now leverage NBFC-ND networks to rapidly scale last-mile banking, especially in under-banked areas. Removing the distance criterion reduces branch supervision burden and allows BCs to operate in more remote locations, but banks must still ensure adequate oversight through board-approved policies.
What you must do
- Update your board-approved BC policy to reflect NBFC-ND eligibility and revised distance norms.
- Ensure contractual agreements with NBFC-NDs explicitly prevent commingling of funds and conflicts of interest.
- Monitor BC operations to avoid forced bundling or restrictive practices that limit customer choice.
- Review and adjust oversight mechanisms for BC outlets now that the fixed distance cap is removed.
Who it affects
All domestic scheduled commercial banks (excluding RRBs), Non-deposit taking NBFCs eligible to become BCs, Existing BC networks and their retail outlets/sub-agents, Customers in under-banked and remote areas
Can all NBFCs now become Business Correspondents?
No, only non-deposit taking NBFCs (NBFCs-ND) are permitted. Deposit-taking NBFCs remain ineligible.
Is there any distance limit between a BC outlet and its base branch now?
The earlier fixed distance criteria (30 km in rural/semi-urban/urban, 5 km in metro) have been removed. Banks must decide distance norms in their board-approved policy, ensuring adequate oversight.
What key conditions apply when appointing an NBFC-ND as BC?
Banks must ensure no commingling of funds, a specific contract to manage conflicts of interest, and no restrictive practices like forced bundling or limiting services to NBFC-ND's own customers.