final implementation handbook

An Implementation Handbook

Catalyzing Financial Inclusion Through the CSCs

Catalyzing Financial Inclusion Through the CSCs 1

Introduction 2

Salient Features of India’s Financial Inclusion Strategy 3

Understanding the Business Correspondent Model 5

Technology Enables the Business Correspondent’s Workflow 7

Common Services Centres Scheme 8

Leveraging CSCs as Business Correspondents 9

The BC- CSC Technology Model: Enabling Kiosk Banking 10

SUCCESS STORY: AISECT-SBI Leverage CSCs in Madhya Pradesh and Chhattisgarh for Financial Inclusion 11

Direct Cash Transfers Ensure BC Sustainability 12

Roles of the Key Stakeholders 13

Implementation Process: CSC SPV as Bank’s BC 14

VLE’s Check List to Launch Financial Inclusion Services 15

Steps to start Kiosk Banking Solution 16

Contents

2 Catalyzing Financial Inclusion Through the CSCs

IntroductionEqual access to financial services including banking, insurance and pension are the driving forces of economic growth and social development for any country. Over 60% of India’s population lacks bank accounts, due to limited penetration of bank branches and stringent policy requirements.

Financial Inclusion is important as it provides an avenue for the poor to bring their savings into the formal financial system, an avenue to remit money to their families in villages and weaning them away from the clutches of the usurious money lenders.

The Government of India has taken a number of proactive steps to ensure equitable access to financial services, including:

• OnJanuary252006,theReserveBankofIndia(RBI),decided to enable banks to use intermediaries as Business Facilitator and Correspondent for providing financial and banking services. Banks were mandated to cover all unbanked villages in the country, in a phased manner.

• OnFebruary15th2011,theSwabhimanSchemewaslaunched with the objective of making banking facilities available to all citizens. The initial target of the scheme

was opening 5 crore accounts and also ensuring access to loans and other credit facilities for farmers and villagers at subsidized rates.

• On26thNovember,2012,thePrimeMinisterannounced that direct benefits like pensions, scholarships, health-care benefits and subsidies must reach the intended beneficiaries without delays and leakages, directly into the bank account of the beneficiary.ItisexpectedthatstartingJanuary1st2013, 51 districts are to rollout direct cash transfers; 18 States from April 2013, while rest of the country later in 2013-14

OnelakhCommonServicesCenters(CSCs)arebeingestablishedacrossthecountryundertheNationale-Governance Plan to deliver online services, primarily in rural areas.

As one of the world’s largest, government approved ICT enabled networks, the CSC network is ideally positioned to strengthen India’s banking network, by extending the business correspondent network.

ThisdocumentexploreshowtheCSCNetworkcanbeleveraged to help India achieve its financial inclusion objectives.

Banking• Onlinereal-time

Banking

• Credit/KCC/Loans

• NPAs

Insurance• PolicySale

• PremiumCollection

• PolicyDelivery

• GrievanceRedressal

Government Remittances• MGNREGs

• Pension

• Scholarship

• Payroll

• Subsidy

Financial Literacy• TrainingVLEs

• FinancialLiteracyCourses

• PartnershipwithNABARD


Salient Features of India’s Financial Inclusion StrategyDecision Description

OpeningofNo-frillsAccounts

• Withaviewtoachievinggreaterfinancialinclusion,initsAnnualPolicyState(2005),RBIadvisedbankstomakebasicbanking‘nofrills’accountavailable,with‘NIL’orveryminimum balances as well as charges, that would make such accounts accessible to vast sections of the population.

• Thenatureandnumberoftransactionsinsuchaccountswouldberestrictedandmadeknown to customers in advance in a transparent manner. All banks are urged to give wide publicity to the facility of such ‘no frills’ account, so as to ensure greater financial inclusion.

Relaxation of KYC Norms

• In2005,theKnowYourCustomer(KYC)requirementsforopeningbankaccountsweresimplified to enable those belonging to low income groups to open no-frill accounts with-out documents of identity and proof of residence.

• InsuchcasesbankscantakeintroductionfromanaccountholderonwhomfullKYCproce-dure has been completed and has had satisfactory transactions with the bank for at least six months.

• Photographofthecustomerwhoproposestoopentheaccountandhisaddressalsoneedto be certified by the introducer.

• Further,bankshavealsobeenpermittedtotakeanyevidenceastotheidentityandaddress of the customer to their satisfaction, including the letter issued by the Unique IdentificationAuthorityofIndia(UIDAI)containingdetailsofname,addressandAadhaarnumberaswellasthejobcardissuedbyNREGAas‘officiallyvaliddocuments’foropeningsmall accounts.

Bank Service Area Approach

• ThroughtheStateLevelBankerCommitteesBankshaveformulatedaroadmapsforachieving Financial Inclusion.

• CommercialBanks,RegionalRuralBanksandCooperativesBanks,haveeachbeenallo-catedunbankedvillageswithapopulationofover2000(FinancialInclusionPlanvillages),within their service area, with a mandate to provide banking services within agreed time-lines.

Engaging Business Correspondent & Facilitators

• OnJanuary252006,theReserveBankofIndia(RBI)decidedtoenablebankstousetheservicesofNon-GovernmentOrganisations/SelfHelpGroups(NGOs/SHGs),MicroFinanceInstitutions(MFIs)andotherCivilSocietyOrganisations(CSOs)asintermediariesin providing financial and banking services through the use of Business Facilitator and Cor-respondent models.

• SincethenRBIhasissuedanumberofnotificationstofurtherempowerthebusinesscor-respondent network, including on September 28, 2010, when it permitted banks to engage companiesregisteredundertheIndianCompaniesAct,1956,excludingNonBankingFinan-cialCompanies(NBFCs),asBusinessCorrespondents(BCs)inadditiontotheindividuals/entities permitted earlier, subject to compliance with its existing guidelines for engaging BCs.


• Further,RBIhasallowedbankstoengagewiththeCSCOperators/VLEsasBCs.

• TheBCmodelallowsbankstodo‘cashin-cashout’transactionsthroughaBCAgent,atalocation much closer to the rural population, thus addressing the last mile problem.

• WithaviewtoensuringtheviabilityoftheBCmodel,bankshavebeenpermittedtocollectreasonable service charges from the customer, in a transparent manner under a Board-approved policy. Banks pay the appointed business correspondents and business facilita-tors a commission for the services rendered by them. Finally, compliance with KYC norms continues to be the responsibility of banks.

• Informationtechnologyplaysakeyroleindeliveringfinancialinclusionservicesinanaf-fordable and sustainable manner, especially in remote and hard to reach areas. Some of the popular technology models being deployed for banking include the deployment of GPRS enabled micro-ATM devices and Internet based kiosk banking solutions. Customers are authenticatedusingsmartcardsand/orbiometricfingerprints.

NABARD’sFinancialInclusion Funds

• Basedontherecommendationsofthe“CommitteeonFinancialInclusion”setupbytheGovernmentofIndia(GoI)underDr.C.Rangarajan.ThefundshavebeensetupatNABARDwithanoverallcorpusofRs.500croreeach.ThecorpusissharedbyGOI,RBIandNABARDin the ratio 40:40:20.

• The“FinancialInclusionFund(FIF)”hasbeensetupformeetingthecostofdevelopmentaland promotional interventions for ensuring financial inclusion.

• The“FinancialInclusionTechnologyFund(FITF)”hasbeensetuptomeetthecostoftech-nology adoption.


Understanding the Business Correspondent ModelThe implementation guidelines issued by the Reserve Bank

ofIndia(RBI),forusingBusinessCorrespondentstoprovide

financial and banking services, highlight the following:

• Abankmayappointbusinesscorrespondentsbysigning

the relevant agreement. While drawing up agreements,

banks should strictly adhere to instructions contained

in the guidelines on managing risks and code of conduct

in outsourcing of financial services by banks, issued by

ReserveBankofIndiaonNovember3,2006.

• Thebankswillbefullyresponsiblefortheactionsofthe

BCsandtheirretailoutlets/subagents.

• EachBCcanthenappointCustomerServicePoints

(CSPs)afterapprovalfromthebank.TheCSPwillbe

associated with a link branch and must be within 30 km

of the link branch.

• WhileanorganizationcanbeaBCformorethanone

bank, at the point of customer interface, a retail outlet or

asub-agentofaBCorCustomerServicePoint(CSP)shall

represent and provide banking services of only one bank.

• Interoperabilityatthecustomerservicepointhasbeen

permitted, thus enabling a CSP to provide cash-in and

cash-out services for any bank, subject to the following

conditions:

• Thetransactionsandauthenticationsatsuchretail

outlets or sub-agents of BCs are carried out on-line;

• ThetransactionsarecarriedoutonCoreBanking

Solution(CBS)platform;and

• Thebanksfollowthestandardoperatingproceduresto

beadvisedbytheIndianBanks’Association(IBA).

• However,theBCoritsretailoutletorsub-agentat

the point of customer interface would continue to

represent the bank, which has appointed the BC.

• ThebankswillpayareasonablecommissiontotheBCfor

the services rendered

ENTITIES ELIGIBLE TO BECOME A BC:NGOs/MFIssetupunderSocieties/Trust

Act•CooperativeSocietiesregisteredunder

Mutually Aided Cooperative, Societies Acts

ortheCooperativeActsofStates/Multi

StateCooperativeSocietiesAct.•Section

25companies•PostOffices•RetiredBank

employees•Ex-Servicemen•RetiredGovt

Employees•Individualownersofkirana/

medical/fairpriceshopowners•Individual

PublicCallOffice(PCO)operators•Agentsof

smallsavingsschemesofGovernmentofIndia/

InsuranceCompanies•Individualwhoown

petrolpumps•Retiredteachers•Authorized

functionariesofwell-runSelfHelpGroups

(SHGs)linkedtobanks•Individualmembers

ofFarmer’sClubs•Individualoperatorsof

RuralMultipurposekiosks/VillageKnowledge

Centers•Individuals/proprietors/ownerswho

manageAgriClinics/AgriBusinessCenters.

•RetiredPostMasters•Individualssuch

as auto dealers, tractor dealers and FMCG

stockists•Insuranceagentsincludingofprivate

insurancecompanies(IRDAcertified)and

postalagents•IndividualsoperatingCommon

ServicesCenters(CSCs)establishedbyService

CentreAgencies(SCAs)undertheNational

e-GovernancePlan(NeGP)•Companies

registered under the Indian Companies

Act1956excludingNon-BankingFinancial

Companies(NBFCs).


Salient Features of the Business Correspondent Model

ABusinessCorrespondent/CustomerServicePointisempoweredtoprovidethefollowingservices:

The above services are offered in respect of the following products:

• Customerenrolment,includingcollectionofbiometricand other details

• Providecard(IDCard,DebitCard,CreditCard),PIN

• DepositofmoneyinanaccountWithdrawalofmoneyfrom an account

• Remittancesfromanaccountwithabanktoanaccountwith the same or any other bank

• BalanceEnquiryandissueReceipts/StatementofAccounts.

• Disbursalofcreditfacilitiestoborrowersinvolvingsmallamounts strictly as per the instructions of the Bank.

• Identificationofborrowersandclassificationofactivities as per their requirements

• Collectionandprimafaciescrutinyofloanapplicationsincluding verification of primary data

• Creatingawarenessaboutsavingsandotherproductsoffered by the Bank and education and advice on managing money & debt counselling

• Preliminaryscrutinyofdataandsubmissionofapplications to the Bank for its review

• Promoting,nurturing,monitoringandhandholdingSelfHelpGroupsand/orJointLiabilityGroupsand/orCreditGroups and others.

• FacilitatingtherepaymentofduesowedtotheBankbyitscustomers/guarantors.

• Saleofthirdpartyfinancialproducts

•NoFrillsSavingsBankaccounts

• RecurringDepositAccounts

• Remittances

• FixedDeposit

• Overdraft/Retailloans

• LoansagainstTDR/NSC/KVPetc.

• GoldLoans

• GeneralpurposeCreditcard(GCC)

• KisanCreditCard(KCC)

• CurrentAccount

• SavingsBankaccount

• TermDeposits

BCs activities would be within the normal course of the bank’s banking business

Organization can be a BC for multiple banks, but CSP shall

represent and provide banking services of only one bank.

Banks to use technology to manage risk and increase

outreach

CSP must be within 30 kms (in rural areas) from local bank

branch

ICT solution to be integrated seamlessly with CBS

Transactions to be accounted for in real-time & customer to

receive immediate confirmation

The banks can reasonable commission/ fee to the BC,

however, customers can’t be charged

The banks fully responsible for the actions of the BCs and their retail outlets / Customer

Service Points (CSP)

NGOs/ MFIs, Post Offices, Cooperative Societies, Section

25 Companies, select Individuals and CSC Operators/VLEs can be

appointed as BCs


Technology Enables the Business Correspondent’s WorkflowOne of the key factors for successfully implementing the BC Model is the bank’s ability to leverage technology to deliver financial services in an affordable and sustainable manner, especially in remote and hard to reach areas. Abusinesscorrespondent/customerservicepointisprimarily responsible for

• Customeracquisitionandservicedelivery

• Customerauthentication

• CashhandlingbytheBC/CSP

It is important to note that in the case of a biometric based kiosk banking solution, all transactions occur online, in real-time through a Bank’s core banking solution(CBS).Sinceeventhefinancialinclusion(no-frill)accounts are hosted on the CBS, this customer is able to access his account from any BC and at any branch, just like any other customer. This is generally not possible in a smart card based micro-ATM model, since customer authentication happens offline and in most cases these accounts are not hosted on the Bank’s CBS. Thus, the citizenisdependentontheBC/CSPthathasopenedhis/her bank account.

In order to ensure uniformity across banks, the following standards for technology implementation in financial inclusion have now been issued:

• UIDAIstandardsformicro-ATMsandbiometriccapture

• TheIndianBank’sAssociation(IBA)andInstituteforDevelopment and Research in Banking Technology (IDRBT)‘OpenStandardsforSmartCardBasedSolutions for Financial Inclusion’.

• NPCIandIBAstandardstosupportinter-bankbiometricbased transactions, for interoperable transactions between the Banks based on Bank level authentication other than UIDAI. This inter-operable switch is called Inter-operableFinancialInclusionSystem(IFIS)andismaintainedbyNPCI.

• UIDAI’sAadhaarbasedinter-operabilitytransactionguidelines for the Aadhaar Enabled Payment System (AEPS).

Technology plays a critical role in enabling a business correspondent to perform its tasks efficiently. Some of the popular technology models being deployed for banking include:

• GPRSenabledmicro-ATMdevices

• Internetbasedkioskbankingsolutions.

• Customerauthenticationusingsmartcardsand/orbiometricfingerprintsand/orbyUIDAI

The typical workflow of a BC using kiosk banking and biometric based authentication is as follows:

Citizen approaches aBC/CSCP

to withdraw money from

a/c

BC/CSPaccesses citizen a/c,(citizenbiometric

authentication required)

If the settlement account has

adquate balance then

Citizen account is debited,

Citizen issued receipt.

Settlement withBC/CSP’s

settlement account in realtime

BC/CSPpays citizen withdrawal

amount in cash

BC/CSPentersamount to be withdrawn.BC/CSP

settlement account is

checked for adequate balance.

BC/CSPlogsinto Bank’s

Kiosk Banking Portal(VLEbiometric

authentication)


A typical CSC is enabled with a PC(s), printer(s), scanner(s),

UPS, digital/web camera and broadband connectivity. Additional equipment in the form of projection systems, biometric devices, etc., may be included, where relevant

and sustainable.

Common Services Centres SchemeImplementedundertheNationale-GovernancePlan(NeGP)formulatedbytheDepartmentofElectronicsandInformationTechnology(DeitY),GovernmentofIndia,theCommonServicesCenters(CSCs)areICTenabledfrontendservice delivery points at the village level for delivery of Government, Financial, Social and Private Sector services in the areas of agriculture, health, education, entertainment, FMCG products, banking, insurance, pension, utility payments, etc.

The Scheme is being implemented in a public private partnership framework with a focus on rural entrepreneurship & market mechanisms. The CSCs have been set upbyimplementationpartnerscalledasServiceCentreAgencies(SCA),whoareappointedbyStateDesignatedAgencies(SDAs)throughatransparentbidprocess.TheCSCsareoperatedandmanagedbyVillageLevelEntrepreneurs(VLEs)whoareappointed by the SCAs.

ThelocationofeachoftheonelakhCSCsisdecidedinconsultationwiththeStateDesignatedAgency(SDA)toservea cluster of 6-7 villages, thereby covering close to 6.50 lakh villages across India. This is the world’s largest government approved ICT enabled network and is ideally positioned to strengthen India’s banking network, by extending the business correspondent network.

TofacilitatethesuccessfulimplementationoftheCSCScheme,aSpecialPurposeVehicle(SPV)named“CSCe-GovernanceServicesIndiaLtd”hasbeenincorporatedundertheCompaniesAct1956.TheSPVaimsto:

• Ensuresystemicviability&sustainabilityoftheCSCScheme

• MonitorachievementsoftheoutcomesbytheCSCs

• EnabledeliveryofG2CandB2CservicesthroughCSCs

• Provideastandardizedframeworkforcollaborativedecisionmaking

• Buildstakeholdercapacityandreplicatebestpractices


Leveraging CSCs as Business CorrespondentsOnApril26,2010,theReserveBankofIndia(RBI)hasallowedBankstoengagewithCSCOperators/VLEsasBusinessCorrespondents, for Financial Inclusion by Business Correspondents. There are a number of advantages for a bank to appointCSCsasbusinesscorrespondents/customerservicepoints,eitherdirectly,throughtheSCAsortheCSCSPV.These include:

Further,onOctober21,2011theDepartmentofFinancialServices(DFS)lettertoBanksregardingFinancialInclusionStrategy and Guidelines, urged banks to engage with CSCs

OnFebruary21,2012DFSissuedamandatetoengageCSCsasBCsinNorthEasternStates,J&K,HimachalPradesh,JharkhandandChhattisgarhforkioskbankingfacilities(DFS)

As a result, 20 SCAs and the CSC SPV have now been appointed as BCs by various banks and implementation has started in 18 States.

Equitable Reach

•Locatedinevery6-7villages/panchayats

Infrastructure

•Computer,printer,webcam,powerbackup,connectivity

Manpower

•MannedbylocalcitizensasVLEs

Reliability

•SupervisedbyStateGovtandGovtofIndia

Services

•OfferG2CandB2Cservicesinvillages

Nearly 1 lakh Common Service Centre (CSCs) have been established by the Department of Electronics & Information Technology.


The BC- CSC Technology Model: Enabling Kiosk BankingSince CSCs already possess the required ICT infrastructure to enable online services, implementation of the kiosk banking solution is emerging as the most viable and cost-effective technology solution. A summary of the requirements to implement this model is as follows:

Description • KioskbankingsolutionenablesrealtimebankingthroughaBank’sCBSthroughanonlinePortal.• Customersareauthenticatedthroughtheirbiometric(fingerprint).• ThesolutioniscompletelyonlineandeliminatestheneedforsmartcardsandPOS.

Bank-BC Relationship

• TechnologyProvider:Bank• BusinessCorrespondent(BC)):SCA/CSCSPV• CustomerServicePoint(CSP):CSC

Equipment Requirement

• Computerwithminimum20GBharddrive• Printer• WebCamera• BiometricFingerprintScanner(asapprovedbyBank)• Internetconnectivity(minimum512kbpsspeed)

Services Offered

• ‘NoFrillAccounts’&SavingAccountopening• GeneralpurposeCreditCard(GCC)/KisanCreditCard(KCC)• TermDeposit/RecurringDeposit• LoansagainstTermDepositReceipt(TDR)etc• Cash-inandcash-outservicesNote:WhiletheCSPwillcontinuetorepresentonlythebankbywhichitwasappointed,theCSPwillbe able to do basic ATM type services across banks. Thus servicing accounts of all citizens irrespective of which bank they have an account with

Investment Required

• SCA/VLEmustmaintainaprepaidsettlementaccountwithBank,fordailytransactionsettlement.The amount to be maintained in the settlement account is decided by the BC and is determined based the number and value of transactions that the BC can execute.

• CSCinvestsinalowcostbiometricfingerprintscanner,approximatelyRs.2600.• SCA/CSCSPVtoinvestinmanpowerforCSCtraining,communityawarenessbuildingandmonitoringactivities.

Commission Paid by Bank

• Openingofnewaccount-One-timefeewhichgenerallyrangesbetweenRs.20-Rs.25peraccount• Transactioncommission:%pertransactionfordepositsandwithdrawals,whichisgenerallyabout0.5%

• Additionalcommissionsarepaidforbusinessfacilitatoractivitiessuchasloanandkisancreditcardprocessing

• MonthlyincentiveofaboutRs.2000permonthforCSCsinFinancialInclusionPlanVillages.Howeverthis is payable based on minimum targets of account opened during the month

Expected Revenue

Based on initial implementations, BCs on an average are earning the following:• Rs.8,000-Rs.10,000permonthperCSPfrombasicbankingactivities,withaminimumofRs.3000

per month per CSP• UptoRs.50,000permonthperCSPfrombusinessfacilitatoractivities(eg.loansandkisancreditcardprocessing)


CSCs operationalised by Aisect have opened over 300,000 bank accounts for SBI, enabling transactions worth over Rs. 200 crores in one year.

AISECT,anSCAinMadhyaPradeshhassignedBusinessFacilitator(BF)andBusinessCorrespondent(BC)agreementswiththeStateBankofIndia(SBI)toofferfinancialservicesintheState.

As a Business Facilitator the CSCs generate business for the bank from the communities living in and around their CSCs and book the business to nearest linked SBI branch. As a Business Correspondent, the CSCs with adequate ICT infrastructure act as a Bank’s Branch and offers the selected banking facilities online. Services offered through the CSCs include:

• AccountOpening

• Deposit/WithdrawalinAccount

• NREGSWagesDistribution&Govt.PensionDistribution

• LoanDistribution(Application&Information)

• Kisancreditcard

• MicroFinance,LoanforAgricultureandAnimal

• LoanforTractor,VehicleandHouse

• RecurringDeposit&FixedDepositsinBank

• LoanRecovery

Implementation process:• CSCs use SBI’s Kiosk banking solution which enables biometric based online user authentication in real-time via SBI’s Portal

• Aspertheagreement,theBChastopaythebankaminimumbankguaranteeandhastomaintainaprepaidsettlement account with SBI, against which all transaction settlement is done on a daily basis.

• TheCSCsareactivatedasacustomerservicepointbyAISECT,afterapprovalfromtheBank.

• Thecustomerisrecognizedthroughabiometricauthenticationprocess.

• Theequipmentrequirementtoenablekioskbankingincludesacomputer,printer,internetconnectivityandalowcostbiometricscanner(approximatelyRs.2600).

• Toensuresuccess,VLEsarerequiredtoundergotrainingonanongoingbasis.Further,theSCAshavetotakeproactivesteps to motivate the VLEs to go out into the community and build awareness around the benefits of kiosk banking at their CSC.

• SCAshavealsotakenproactivestepstoensurethatvariousGovernmentSchemedisbursalsincludingNREGSwages,old age pension and scholarship payment, happen through the CSCs.

Challenges:• ApprovalsforappointmentofCSCsadCSPsbybank

• Ensuringaccountsarenotdormant,andregulartransactionstakeplace

• Creatingawarenessatthefieldlevelregardingtheimportanceofbanking

• Creatingdemandforbanking,byensuringlinkagesfordirectcashtransferofGovernmentSchemeBeneficiaries

SUCCESS STORY AISECT-SBI Leverage CSCs in Madhya Pradesh and

Chhattisgarh for Financial Inclusion


Direct Cash Transfers Ensure BC SustainabilityOn26thNovember,2012,thePrimeMinister’sannouncedthatdirectbenefitslikepensions,scholarshipsandhealth-care benefits must reach the intended beneficiaries without delays and leakages, directly into the bank account of the beneficiary. Apart from these direct benefits, the Government will also provide an amount of over Rs 3 lakh crore in subsidieswhichtoomustreachtheintendedbeneficiaries.ItisexpectedthatfromJanuary1st2013,51districtswillroll out direct cash transfers; 18 States from April 2013, while rest of the country will be brought into the ambit of the program later in 2013-14. It is expected that these transfers will be enabled by UIDAI.

The success of this programme will be dependent on the following:

• UIDAIbasedbeneficiaryenrolmentintotheGovernmentProgramme/Scheme,bytherespectivedepartment,asperthe Scheme’s requirements and Aadhaar seeding of existing databases for de-duplication and elimination of bogus beneficiaries

• Timelydirecttransferofthebenefitsand/orsubsidyintothebeneficiary’sbankaccount,nocashtransaction

• Beneficiarytobeabletoaccesshisbankaccount,inhisvillage,throughabusinesscorrespondent

While UIDAI will enable accurate authentication of beneficiaries of government benefits and subsidiaries, the business correspondent network of banks will play a critical role in ensuring that people have no trouble in opening bank accounts and withdrawing and depositing cash. The real benefit of the cash transfer scheme will reach the citizens only if the ability to withdraw and transfer the cash is available to them at their doorstep rather than a distant bank branch. Thus, steps must be taken to increase the reach of the business correspondent network. These include:

• Abankshouldhaveabusinesscorrespondentinanyvillagewithinhisservicearea,irrespectiveofitbeingafinancialinclusion plan village.

• ABusinessCorrespondentshouldpreferablybepresentatallSchemeenrolmentcenters,toensurethatbankaccountscan be opened at time of enrolment of into a Scheme

• ImplementationofinteroperabilityallowedbyRBIforBusinessCorrespondentsmustbeexpedited.Thiswillallowabusiness correspondent to act as a human ATM in a village, servicing all beneficiaries, irrespective of the bank in which they hold an account.

With over 95,000 CSCs operational across the Country, covering almost 6.5 lakh villages, the Common Services Centers arebestpositionedtoundertakebothtasksofenrolmentandfinancialinclusion.InmanyStateslikeJharkhand,UP,AP,Maharashtra, etc, CSCs are already involved in enrolment of beneficiaries into various Schemes and Programs.

By activating the CSCs as Business Correspondents, Banks will be able to strengthen their network in a short period, therebybeingabletomeetthetargetssetbyNationalCommitteeonDirectCashtransfers,efficientlyandwithmarginal incremental costs to the banks.

Further, channelling direct cash transfer through the BC network, will strengthen the financial sustainability of a BC considerably, ensuring ongoing business for them.


Roles of the Key Stakeholders n State Government/SDA:• IntegratingCSCprojectwiththebankingmandatesfortheState,bycollaboratingwiththeStateLevelBanker’sCommittee(SLBC)

• Linkingcurrentgovernmentschemes’wagesandbenefitdisbursementswithbankaccounts,toensureregularcashflow in rural areas

• Ensuringconnectivityinruralareas

• MobilizingandsensitizingGovernmentfunctionaries

n Banks:• AppointingSCAs/CSCSPVasBCs,toenableCSCstodeliverfinancialservicesinruralareas

• Providethetechnicalsolutionsnecessaryforonlinekioskbankingdelivery,userauthenticationandmonitoring

• OfferingawidevarietyofbankingservicesinruralareasviatheBCs

• SynchronizingwithGovernmentmachinery

• TrainingSCAsandVLEsfordeliveryoffinancialservices

• PayrequiredcommissionstoBusinessCorrespondenttoensuresustainableservicedeliveryviacustomerservicepoints

• Providetechnicalsupportforsuccessfuldeliveryofservices

n CSC SPV/SCAs:• SignBCandBFagreementswithbanks

• EnsuringCSCshavetheadequateinfrastructure(includingbiometricdevices)tobecomecustomerservicepoints

• EnsuringadherencetobankingnormsasperBCguidelines

• Ensuringpowerandconnectivityatitscustomerservicepoints

• Ensuringtimelyservicedelivery

• ProvidinganonlinemechanismenablingVLEstodeliverfinancialservicesviatheBank’sonlinesolution.

• Supportingawarenessbuildingandtrainingactivities

• SharingtheCommissionpaidbyBankwithCSPinatimelymanner

• CommonServicesCentre/VillageLevelEntrepreneurs(VLE):

• Gettingtrainedtodeliverfinancialservices

• SigningtherelevantagreementwiththeBCtobecomeCSP

• EnsuringrequiredinfrastructureisavailableattheCSCtodeliveronlineservices

• EducatingthecitizensandlocalgovernmentofficialsonthebenefitsofavailingfinancialservicesatCSCs

• Ensuringtimelyservicedeliveryandadherencetothebankingnorms


Implementation Process: CSC SPV as Bank’s BCTopic Bank CSC SPV (BC) SCA (BC Manager) VLE (CSP)

BC Agreement ApproveCSCSPV/SCAas the BC of the Bank

Sign BC agreement with Bank and Open Commission Account

with Bank

Enable CSCs to be appointed as CSP

Agree to become a Customer Service Point

KO Identification & Registration

Map CSP requests, through Regional

Offices, linking to local branch and authorizing

appointment of CSP

Create an online mechanism for VLEs to register as CSP. All

registrants through this process will be vetted by

the SCA.

To identify and register all eligible VLEs who are interested in becoming

a KO.

Provide BC with the cumulative KO list, as per

prescribed formats

VLEtoregisterwithSCA/SPV to become KO

VLE to ensure that information provided at

time of registration is authentic

Kiosk Banking Setup

Bank to provide BC with access to the Kiosk

Banking solutionProvide detailed

Instruction Manual for BC/KOoperations

Confirm KO in the system, after creation by BC

Setup BC Manager & KO accountdetails(usingthe

ID codes generated by localbranch)

Issue instructions to SCA regarding KO account

setup

Provide the KOs with clear instructions on

setting-up and operating Kiosk Banking Account

Capture KO finger prints

Coordinate with the SCA to setup the KO account

online

Payment Mechanism & CashHandling

Maintain CSP settlement & commission account includingsweepin/outfrom CSP account to

complete transactions on behalf of the citizen. Maintain BC’s & BC

Manager commission accounts

Allow CSPV to monitor account activity,

including commissions earned and account

balanceProvide Admin accounts

to BC and & BC Manager to monitor KO transaction details and

commission earned

Open Commission Account with Bank

Provide Bank with the relevant bank account

details of the BC Manager andKO(settlementandcommissionaccount)

Open a settlement account at the local link branch and provide BC

with account details

Awareness Provide the banners to be displayed at the

CSP and marketing material to CSP

CSC SPV to put up advertisement after signing agreement

with Bank as BC

SCA to arrange for local-level awareness amongst the masses

Display Bank’s Board at CSC with full details

on types of banking services to be offered

Create awareness in locality regarding

service offerings


Topic Bank CSC SPV (BC) SCA (BC Manager) VLE (CSP)

Training& Support

To provide technical training to all CSPs at

the district level

To provide detailed Instruction Manual

forBC/CSPoperationsonline

Make instruction manual available to all BC Managers and CSP

To circulate Instruction Manual to

CSP

Coordinate CSP training with local Linked Branches

VLE to attend training

Procurement of Required Infrastructure

Introduce BC to the supplier of the biometric device.

Negotiatefixedpricefor the biometric device, with the

supplier, for CSCs

Make arrangements for CSP to

procure required infrastructure,

including connectivity and biometric device

Procure the required bio-metric device at the pre-fixed rates.

Transaction Settlement

Bank will reflect the cash movement in citizen and CSP

settlementa/cinrealtime

Allow transaction monitoring by BC, BC

Manager and CSP.

Monitor transaction activity of all SCAs

and VLEs on the system

Monitor transaction activity of all VLEs created under their

account

CSP to undertake transaction on the

Kiosk Banking Portal, as per instructions.

Commission Settlement

Make direct automated monthly

commission payments to the BC.

Share commission with BC Manager

and CSP which are subject to monthly

reconciliations.

VLE’s Check List to Launch Financial Inclusion Services

• EnsureSCAis onboard to deliver bsuiness correspondent services

• Identifylocallinkbranch closest to the CSC

• Submitrequireddetails as per Bank’s format throughSCA/CSC SPV

• Awaitformalapproval from bank

Approval for CSP Appoinment

• EnsureCSCisequiped with Computer, Printer, Webcam, power backup

• MinimumConnectivity of 512 kbps

• Procurebiometric device

Infrastructure Readiness

• Assessquantumofsettlement account based on availability of local business

• Opensettlementaccount at local link branch and maintain an adequate balance

• Undergotherequiredtraining provided by the bank

• Configuethekiosk solution and biometric device to render services

Activation

• Logintosystembyinvoking URL

• Providebiometricauthentication and select service to be rendered.

• AdheretotheKYCnorms of the Bank

• Ensurebiometricauthentication of the customer

• Issuereceipton successful completion of service

Rendering Services

• Maintainregister of all transactions

• Reconciletransactions with generated MIS

• BCtopaycommission on a monthly basis for all completed transactions

Commission Settlement


1. SCA to enter into agreement with CSC SPV and the draft copy of agreement can be downloaded. VLE to provide undertaking accepting terms and conditions for doing Kiosk Banking work asperproformamentionedintheagreement.(Download:AgreementwithSCA)

2. SCA intending to start FI services in his state of operation, is required to provide details of eligible VLEs as per standard format ofSBIwhichmaybedownloaded(Filename:statename_VLE.xls).ItistobeensuredthatCSCismappedtothenearestbranchofSBIwhichiscalledlinkbranch.(Download:SBIStandardFormat,SBIBranchMaster)

3. It is obligatory to ensure that connectivity of required CSC is there and must be on live run on OMT tool.

4. CSCSPVtoapplytoSBI,LHOofthestateaswellastoCentralTeam Mumbai for approval of CSP for these VLEs.

5. SCAtofollowupthematterwithSBI,LHOtogettheVLEsapproved.

6. CSC SPV shall share the CSP codes approved by SBI with SCA.7. On having obtained approval and CSP codes, open zero balance

settlement account in the nature of current account for these VLEs and see that all flags for levying charges be remained off in the software. SCA to co-ordinate with SBI officials and obtain letter from them advising their branches to extend co-operation to VLEs in opening the account.

8. As per arrangement, each VLE shall have separate settlement account wherein all Dr & Cr transactions would take place while there will be only single commission account in the name of CSC SPV.

9. SCA to procure Finger Print device for each VLE. Document for procurementfordevicemaybedownloaded(Download:FingerPrintDevice).

10. SCA to make arrangement for training to VLE on its operational part from SBI.

11. In the meantime, CSC SPV will configure SCA as Sub BC in Kiosk Banking Software and SCA to submit following details to CSC SPV :• NameofSCA• AddressofthecompanywithPINcode• TodesignateauthorisedofficialtoconfigureKoCode• GivePassportno.ofauthorisedofficial• Mentionhismobileno.• ExpirydateofMSAagreement

12. CSC SPV shall provide login and password for SCA to authorised official for configuring approved VLEs.

13. CSC SPV to create new User Group in the system.14. SCA to configure KO code in the system after getting above

login. And capture his figure prints and generate his login and transaction password. SCA may down load SBI manuals for this work(Download:SBIBCManual,SBIKOUserManual).

15. SCA to enter Settlement account number for each VLE and

mac-id of machine to us in the above excel file shared by CSC SPV after having allotted KO codes. CSC SPV to send this file for onward submission to SBI for configuration.

16. After obtaining confirmation from SBI for having configured settlement account and mac-id, CSC SPV shall share this with SCA. KO operator can now operate the system.

17. KOoperatortologintosystembyinvokingURL.Heshallverifyhis finger prints. And get screen for Customer Creation, Existing Customer, Options, Reports & Identity Card. In nut shall he can create new customers, and work on existing customers.

18. For customer creation, he shall get the form filled by customer with2Photos,addressproofandIdentityproofofcustomer.Heshall enter required details in system and get customer reference numbergeneratedbysystem.Heshalldepositphysicalformwithlink branch.

19. Nextday,heshallgetaccountnumberbyinvokingcustomerreference number in the screen.

20. Hecannowinitiatetransactionsondeposit,withdrawal,transferand open RD account for the customer.

21. VLE has to maintain sufficient balance in his settlement account. If customer wants to deposit a sum to his account, he shall tender cash to VLE and VLE shall transfer this amount by debit to his settlement account and crediting to customer account after having his finger prints verified by VLEs. If customers withdraws amount from his account, VLE to pay cash and do entry in the system by debiting customer account and crediting his settlement account.

22. The system shall ask for collecting commission while opening the account of the customer. This may be retained with VLE after recording it in a proper register. Format already provided to SCA.

23. On doing transaction, the system deducts commission and the total commission so earned is divided between CSC SPV, SCA and VLE in the present ratio of 10:15:75 and this ratio is subject to change keeping in view of the work involved and the decision of CSC SPV shall be final and binding on all parties.

24. At the end of month. VLE to raise invoice in respect of share to total commission to SCA after deducting the amount of cash collected by him and this invoice to be duly supported with a copy of details of transactions done by him in the month. SCA to forward this invoice to CSC SPV.

25. SCA also to raise invoice in respect of his share to total commission to CSC SPV.

26. CSC SPV also to raise invoice to SBI in respect of shares of CSC SPV, SCA &VLE and get credit to his commission account.

27. CSC SPV after reconciling the share of commission amounts, credit to accounts of SCA & VLE respectively.

28. SCA to provide weekly report on transactions and monthly report on commission to CSC SPV. Format of transaction report provided to SCA.

Steps to start Kiosk Banking Solution :

ConclusionDue to their location and availability of ICT infrastructure and extensive reach in rural India, CSCs are best poised to deliver financial services in rural India, helping various banks meet their financial inclusion mandates. The current policy and regulatory environment favours the appointment of CSCs as business correspondent, and the activation process is underway.

Online kiosk banking requiring biometric authentication for the customer, is the preferred technology solution adopted byCSCs.AadharbasedauthenticationisnowbeingtestedthroughCSCsinJharkhand.

The success of financial inclusion depends on the availability of internet connectivity, VLE training and motivation, linkages with Government Schemes disbursement, community awareness and sensitization.

The Government’s mandate to ensure direct cash transfer for benefits and subsidy payments will strengthen the sustainabilityofBCsacrossthecountry.However,withtheaggressivetargetsetbythePrimeMinister,CSCswillplayacritical role in strengthening the BC network

n Department of Financial Services: http://financialservices.gov.in/n Reserve Bank of India: www.rbi.org.in/n NationalPaymentsCorporationofIndia(NPCI):www.npci.org.in/n NABARD:www.nabard.orgn VariousNotificationsissuedbyRBI:

• Mar 02, 2012 : Financial Inclusion by Extension of Banking Services - Use of Business Correspondents (BCs) [Inter-operability]

• Dec 10, 2010 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents / Business Facilitators by Urban Co-operative Banks

• Sep 28, 2010 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) [Guidelines]

• Apr 26, 2010 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) [CSCs as BCs]

• Nov 30, 2009 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) [Working Group]

• Apr 24, 2009 : Financial Inclusion by Extension of Banking Services – Use of Business Facilitators (BFs) and Business Correspondents (BCs) [Distance from Branch]

• Aug 27, 2008 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) [Individuals & Sub-agents]

• Aug 27, 2008 : Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs) – Section 25 companies

• Apr 24, 2008 : Financial Inclusion – Use of Business Facilitators/Business Correspondents [Link Branch]

• Mar 22, 2006 : Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and Correspondents [ProhibitinguseofNBFCs]

• Jan 25, 2006 : Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and Correspondents [BC & BF Model]

n January2008:RangarajanCommitteeReportonFinancialInclusion:www.nabard.org/pdf/report_financial/full%20Report.pdf

n Common Services Centre Scheme: apna.csc.gov.in

Additional Resources


CSC E-Governance Services India Limited3rdFloor,ElectronicsNIketan,CGOComplex,LodhiRoad,NewDelhi-110003

Email:[email protected]:011-32215528/011-24301349

Facebook:https://www.facebook.com/cscspvorhttps://www.facebook.com/cscscheme

Twitter:https://www.twitter.com/CSC_India

Blog:https://www.commonservicescenters.blogspot.inWebsite:csc.gov.in

final implementation handbook

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