UPSC Prelims 2014 Q32: Indian Economy – Digital Payments & Financial Inclusion
What is/are the facility/facilities the beneficiaries can get from the services of Business
Correspondent (Bank Saathi) in branchless areas?
1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.
Select the correct answer
using the code given below.
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (c) Both 1 and 2
Explanation
Business Correspondent (Bank Saathi)
A Business Correspondent (BC) is an agent who offers basic banking services on behalf of a bank where there is no branch.
| Statement | Verdict | Fact |
|---|---|---|
| 1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages | Correct | Direct Benefit Transfer money is paid out through BCs |
| 2. It enables the beneficiaries in the rural areas to make deposits and withdrawals | Correct | BCs carry handheld devices (micro-ATMs) |
About Business Correspondents:
| Feature | Detail |
|---|---|
| Allowed by | RBI, from 2006 |
| Who can be one | NGOs, post offices, kirana shop owners, retired teachers, self-help groups |
| Services | Opening accounts, deposits, withdrawals, remittances, small loans |
| Purpose | Financial inclusion |
Answer: (c) Both 1 and 2.
Why each option is right or wrong
- (a) Incorrect. Statement 2 is also true: they allow deposits and withdrawals.
- (b) Incorrect. Statement 1 is also true: they pay out subsidies and social security benefits.
- (c) CORRECT. Bank Saathis deliver benefits and allow deposits and withdrawals in villages.
- (d) Incorrect. Both statements describe real services.
Key point
Business Correspondents (RBI, 2006): bank agents in branchless areas; deposits, withdrawals, remittances and payment of benefits through micro-ATMs.
Remember
Business Correspondent = banking at the doorstep.
Common mistakes
- Thinking BCs only collect deposits and cannot pay out.
- Confusing Business Correspondents with Business Facilitators, who cannot handle cash.
- Forgetting their role in Direct Benefit Transfer.
Exam tip
Bank Saathi = a bank branch on two legs.
Sources
- Reserve Bank of India — Guidelines for engaging Business Correspondents
- Department of Financial Services — Financial Inclusion: Bank Mitra