RBI proposes new BC structure and branch norms in draft guidelines
Mumbai, Apr 6, 2026
RBI's draft norms revamp BC structure, tighten branch rules, and aim to expand banking access while strengthening governance and consumer protection
The Reserve Bank of India (RBI) has proposed draft norms on branch authorisation and the use of business correspondents (BCs), introducing a structured framework that classifies BCs into two categories—Business Correspondent-Banking Outlets (BC-BOs) and Business Correspondent-Banking Touchpoints (BC-BTs).
Under the draft circular, the RBI proposed doing away with the existing Business Facilitator (BF) model, mandating that all such entities transition to the new structure by September 30, 2026. The proposed amendments are set to come into effect from July 1, 2026.
“Considering that Business Facilitator (BF) undertakes functions similar to those of Business Correspondent (BC), there shall be no separate category of BF. Existing BFs, if any, shall be categorised as BC-BO or BC-BT by September 30, 2026,” the RBI said in the circular.
The draft norms also redefine a “banking outlet” to include both branches and BC-BOs, a move aimed at expanding formal banking presence, especially in rural areas. In line with this, the definition of unbanked rural centres has been revised to exclude locations that have either a bank branch or a BC-BO. The RBI also clarified that ATMs and other automated channels such as cash deposit machines and kiosks will not be treated as banking outlets under the revised framework.
The draft also laid down specific provisions for subsidiaries of foreign banks. It said such entities will be subject to the same branch authorisation guidelines as domestic scheduled commercial banks. However, they will require prior RBI approval to open banking outlets in locations deemed sensitive from a national security perspective. The RBI added that these subsidiaries will also not be permitted to operate through BC-Banking Touchpoints (BC-BTs) in such areas, with a list of restricted centres to be provided separately.
“The guidelines on branch authorisation as applicable to domestic scheduled commercial banks as amended from time to time shall also be applicable to subsidiaries of foreign banks. Such subsidiaries, however, shall require prior authorisation of RBI for opening BO at certain locations that are sensitive from the perspective of national security,” according to the draft circular. Further, “the subsidiary shall also not have any presence in these locations in the form of BC-BT. A list of such centres would be made available to subsidiaries by RBI.”
The RBI has tightened the definition of a bank branch, specifying that it must be a fixed-point service unit staffed by bank employees and operate for a minimum of four hours a day on at least five days a week. Banks will be required to ensure proper signage, customer grievance mechanisms, and regular monitoring of such branches.
To strengthen governance, the central bank made it mandatory for bank boards to approve policies related to BC engagement and review their operations at least once every six months.
The scope of activities that can be carried out by BC-BOs has been significantly expanded. These include account opening, cash deposits and withdrawals, fund transfers, bill payments, KYC updates, grievance handling, and even lead generation for loans and third-party financial products. BC-BTs, however, will be restricted to limited services such as small-value transactions and remittances.
The draft also lays down stricter eligibility and due diligence norms for engaging BCs. Banks will be required to assess factors such as financial soundness, governance standards, and technological capability before onboarding such entities. The RBI has reiterated that banks will remain fully responsible for the actions of their BCs.
On the operational front, the regulator has mandated real-time transaction recording through technology systems integrated with banks’ core banking platforms. It has also introduced clearer guidelines on distance norms, monitoring mechanisms, and restrictions on BC operations, including a bar on subcontracting and limits on multi-bank arrangements at the outlet level.
The RBI has proposed a structured remuneration framework for BCs, with BC-BOs receiving both fixed and variable compensation, while BC-BTs will be paid only variable remuneration. The Indian Banks’ Association will determine the minimum fixed component.
Consumer protection has been a key focus of the draft guidelines. Banks will need to ensure clear disclosure of services, fees, and grievance redressal channels at BC outlets. Customers will also have access to the RBI Ombudsman mechanism in case of unresolved complaints.
In addition, BCs will be required to undergo mandatory training and certification within nine months of starting operations, with periodic refresher programmes thereafter.
The central bank has also streamlined reporting requirements, directing banks to report any opening, closure, shifting, or inactivity of branches and BC outlets within a week through a centralised portal.
Separately, the RBI has given banks greater operational flexibility by allowing them to shift, merge, or close certain offices without prior approval.
[The Business Standard]
