Business Correspondent
Also written Business Correspondent (Bank Mitra) · Bank Mitra
A representative of a bank, also called a Bank Mitra, who goes to customers in remote places and villages to open accounts, take deposits, transfer funds and give small loans.
In plain language
A Business Correspondent brings the bank to the customer.
Many villages have no bank branch nearby. Going to one can mean a day's travel and a lost day's wages. A Business Correspondent is a representative of a bank who goes to people, "usually in remote locations/villages", and helps them with their banking.
The booklet also calls this person a Bank Mitra. Under the Pradhan Mantri Jan Dhan Yojana, a bank account can be opened with any bank branch or Business Correspondent (Bank Mitra).
The important point: a Business Correspondent is not a bank. The account, the deposit and the loan all belong to the bank the correspondent represents.
How it works
What a Business Correspondent can do (Chapter 4, table of new categories introduced by the RBI):
- Opening of bank accounts
- Deposits
- Transfer of funds
- Collection of loan deposits (repayments)
- Disbursal of small value credit
- Collection of payments and fees, and similar services
How it fits with the other new categories:
| Business Correspondent | Payment Bank | Small Finance Bank | |
|---|---|---|---|
| Is it a bank? | No, a representative of a bank | Yes | Yes |
| Main purpose | Reach customers in remote places | Deposits, payments and remittances | Small deposits and small loans |
Its role in financial inclusion (Chapter 9). PMJDY was launched in August 2014 to ensure financial inclusion of every individual without a bank account. Accounts can be opened through a Business Correspondent (Bank Mitra), and come with a zero balance facility, a RuPay debit card, accident insurance and life cover (subject to conditions), an overdraft facility up to a certain amount (one account per household), mobile banking and Direct Benefit Transfer.
Safety habits still apply. The booklet's digital payment Don'ts, such as never sharing passwords, hold whether you bank at a branch or through a correspondent.
A worked example
Names and amounts are illustrative.
Ramesh Oraon lives in a village in Gumla district. The nearest bank branch is 22 km away. A bus trip there and back costs Rs 80 and a day's wages of Rs 350.
Opening the account. A Bank Mitra visits the village panchayat office once a week. Ramesh opens a PMJDY account with him. It is a zero balance account and he receives a RuPay debit card.
Using it over a year:
| Service | Through the Business Correspondent |
|---|---|
| Deposit of harvest earnings | Rs 12,000 |
| Fund transfer to his son studying in Ranchi | Rs 2,000 a month |
| Small loan for seeds, disbursed | Rs 8,000 |
| Loan repayment collected | Rs 8,600 over 6 months |
The saving. Had he gone to the branch for each of the 12 transfers, plus the deposit, the loan and six repayments, that is 20 trips:
Cost per trip = 80 + 350 = Rs 430
20 trips × 430 = Rs 8,600
That is as much as the whole loan repayment. The Business Correspondent removed it.
Why NISM asks about it
Chapter 4 (Savings Related Products) defines the Business Correspondent alongside the Payment Bank and Small Finance Bank. Chapter 9 (Government Schemes) says PMJDY accounts can be opened with any bank branch or Business Correspondent (Bank Mitra). Expect: "Who goes to customers in remote villages on behalf of a bank?" and "Where can a PMJDY account be opened?"
Common exam traps
- A Business Correspondent is a representative of a bank, not a type of bank.
- Bank Mitra is another name for a Business Correspondent in the PMJDY section.
- It can disburse small value credit and collect loan repayments on the bank's behalf.
- The new categories were introduced by the RBI, not SEBI or the Government alone.
- PMJDY was launched in August 2014. Accounts can be opened at any bank branch or through a Business Correspondent.
Check yourself
1.Which of the following can a payment bank NOT do?
- a)Provide savings and current account facilities
- b)Issue ATM or debit cards
- c)Accept recurring or fixed deposits and give loans or advances
- d)Offer payment and remittance services
Show the answer
Answer: (c) Accept recurring or fixed deposits and give loans or advances
The chapter's payment bank entry: "Provides savings account/current account facilities. Can accept DEMAND DEPOSIT BUT NOT RECURRING/FIXED DEPOSIT. Can issue ATM/Debit Cards BUT NOT CREDIT CARDS. CANNOT GIVE LOANS/ADVANCES. Offer payment and remittance service through various channels." Learn the three prohibitions as a set: no fixed or recurring deposits, no credit cards, no loans or advances. Every exam question on payment banks is built from one of them. Set this against the small finance bank, which is almost the opposite creature — it exists to lend, taking small deposits and disbursing small loans to "small business units, micro and small enterprises, small and marginal farmers and entities in the unorganized sectors", serving "unserved and underserved sections of population." And note that a Business Correspondent is not a bank at all but "a representative of a bank who goes to customers."
2.Which statement about Pradhan Mantri Jan Dhan Yojana is correct?
- a)It requires a minimum balance of ₹500 and offers a cheque book free of cost
- b)It is a zero balance account with no minimum balance mandated, though a cheque book requires fulfilling minimum balance criteria; the overdraft facility is available against one account per household
- c)Accounts can only be opened at a bank branch, not through a Business Correspondent
- d)It was launched in 2018 to replace all existing savings accounts
Show the answer
Answer: (b) It is a zero balance account with no minimum balance mandated, though a cheque book requires fulfilling minimum balance criteria; the overdraft facility is available against one account per household
PMJDY was "launched in AUGUST 2014... to ensure FINANCIAL INCLUSION OF EVERY INDIVIDUAL WHO DOES NOT HAVE A BANK ACCOUNT IN INDIA." The facilities include a "Zero balance account", "Not mandated to have a minimum balance in the account", a RuPay debit card, accidental insurance cover and a life cover, mobile banking, interest earned on the deposits, Direct Benefit Transfer and easy access to pension and insurance products — with two qualifications that are exactly what examiners test: "Overdraft facility up to a certain amount. THIS FACILITY IS AVAILABLE AGAINST ONE ACCOUNT PER HOUSEHOLD", and "To get a cheque book, the individual will have to fulfil MINIMUM BALANCE CRITERIA." Option (c) is wrong on a stated fact: "Accounts can be opened with ANY BANK BRANCH OR BUSINESS CORRESPONDENT (BANK MITRA)" — which is how the scheme reached villages without branches.
3.A village household has no bank account, no branch nearby, and no spare money for a minimum balance. Why does opening a Jan Dhan account come before everything else in this chapter?
- a)Because it is the only scheme that pays interest
- b)Because the bima schemes debit premiums from a bank account, Atal Pension Yojana is for bank account holders, and Direct Benefit Transfer and the credit schemes all require one
- c)Because it replaces the need for any insurance
- d)Because a Jan Dhan account is compulsory by law
Show the answer
Answer: (b) Because the bima schemes debit premiums from a bank account, Atal Pension Yojana is for bank account holders, and Direct Benefit Transfer and the credit schemes all require one
Almost every scheme in the chapter runs through a bank account. Both bima schemes work by "a fixed annual premium... deducted from the bank account of the insured through AUTO-DEBIT facility"; Atal Pension Yojana "may be opened for ALL BANK ACCOUNT HOLDERS"; Direct Benefit Transfer needs one by definition; and the credit schemes are bank lending. That is why PMJDY exists — "to ensure FINANCIAL INCLUSION OF EVERY INDIVIDUAL WHO DOES NOT HAVE A BANK ACCOUNT IN INDIA", providing "banking, savings and deposit accounts, remittance, credit, insurance and pension in an affordable manner to all." Each of the household's obstacles is answered: no branch — "any bank branch OR BUSINESS CORRESPONDENT (BANK MITRA)"; no minimum balance — "zero balance account" and "not mandated to have a minimum balance." Chapter 4 adds the deeper reason: cash at home is unsafe, earns no interest, and creates no credit eligibility.
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- Debit cardA card linked to your own bank account, used at ATMs and to pay at shops. It spends money you already have, so there is no interest and no credit history needed to get one.
- Payment BankA new category of bank that offers savings and current accounts, debit cards and remittances, but cannot give loans, issue credit cards, or accept fixed or recurring deposits.
- Pradhan Mantri Jan Dhan YojanaThe Government's financial inclusion scheme launched in August 2014: a zero-balance bank account with a RuPay debit card, insurance cover, an overdraft facility and direct benefit transfers.
- Reserve Bank of IndiaIndia's central bank, set up on April 1, 1935 under the RBI Act. It runs monetary policy, regulates and supervises banks and NBFCs, is banker to the Government and lender of last resort.
- Small Finance BankA category of bank introduced by the RBI that takes small deposits and gives small loans, mainly to people and small businesses the banking system does not reach well.
- OverdraftA bank facility that lets a customer take a short-term loan to meet urgent needs, and repay it within the timeline agreed with the bank. PMJDY accounts carry one, limited to one account per household.