NON Bank Retail outlet.............

In an effort to democratize access to finance, Nepal Rastra Bank has decided to give interest free loans to those banks and financial institutions (BFIs) that open a physical branch in 22 remote districts of Nepal. Incentivize banks to expand in the hinterland is definitely a strong catalyst for financial inclusiveness of thousands of unbanked rural population. However, despite having numerous incentives, opportunities and policies like “deprived sector lending” in place banks are often reluctant to penetrate the uncharted territories. This reluctance is primary derived due to high per customer transaction cost, political risk and lack of human capital. Increasing cost of fund, due to the slowdown in realty sector and poaching of depositors of one bank by other, will also contribute to make BFIs hesitant to add new non banking assets in their balance sheet. Rather than encouraging the BFIs to setup a “brick and mortar” physical bank branch in the remote area, Rastra Bank should allow BFIs to adopted branchless banking model called Business corresponding banking. "In this model, BFIs will work with networks of existing nonbank retail outlets—such as cold stores,chiya pasals —to deliver financial services. These nonbank retail will act as a intermediary of the banks.BFIs will train and equip retail outlets owners with mobile technology that will allow them to carry the banking transaction. Correspondent banking benefits a range of stakeholders. The poor gain convenient access to financial services in their own communities. Financial institutions reach a vast new customer segment. Non bank retail outlets increase their sales volumes and have an opportunity to develop deeper relationships with customers. In Brazil, where the strategy has enjoyed its greatest successes, about 1,600 municipalities (approximately one-third of the total) are served solely by correspondent-banking outlets." - Mckinsey,2010