“Business Correspondent (BC) network has become a backbone for Financial Inclusion (FI) in the country since it was introduced nearly two decades ago. The BC model was introduced to bridge the gap between formal Banking services and Underserved populations, particularly in rural areas. Challenges such as physical distances and linguistic barriers have historically restricted access to organised finance for many. BC network address these gaps by offering ease of service even at the door step that brings financial services directly to rural populations.
Despite its critical role, the BC model is under strain due to several challenges. Commission rates have remained stagnant despite inflation and rising operational costs, which impacts commercial viability for BC agents. Simultaneously, with other sectors like eCommerce opening up, there is churn in the channel.
BC model provides essential banking services at the doorstep of customers and this channel helps Banks to significantly reduce their branch operation costs in servicing large section of the population. Banks need to further incentivise and provide opportunities to BCs to increase their income for long-term participation in the Financial Inclusion ecosystem.
We expect that the Honourable Finance Minister Smt. Nirmala Sitharaman in the upcoming Union Budget will visit these issues related to BC channel including the diversification of their income stream through a wider bouquet of services. Another focus will be on addressing liquidity challenges faced by BCs.
The National Strategy for Financial Inclusion 2025-30, a vision document by RBI, also recommends to expand the Payment Infrastructure Fund: Fund usage be extended to support Business Correspondents (BCs) and Customer Service Points (CSPs). BCs/CSPs bear recurring costs to upgrade outlet infrastructure (e.g., GPS devices, L1 biometrics, CCTV, counterfeit currency note detectors) to comply with evolving RBI, UIDAI, and Bank guidelines. To introduce Targeted Specific incentives for BCs conducting Financial Literacy camps, Social Security Schemes enrolment drives, and ReKYC camps may be announced. BCs/CSPs invest significant time and resources in customer mobilization and promotional activities for these Government, RBI, and Bank priority initiatives.
To enable BCs as Digital Loan Partners: authorizing BCs to digitally source, service, and recover small-ticket loans. Banks’ high operational costs often hinder small credit availability. Leveraging BCs’ local presence offers a more accessible and cost-effective solution for managing the entire lifecycle of microloans.
Utilize Bank CSR Funds for Skilling: Directing bank Corporate Social Responsibility (CSR) funds toward skilling and certifying BCs and CSPs. BCs undertake considerable effort and expense in training and upskilling their CSP networks. Provide CSP Welfare Support: Seek Support for essential CSP welfare measures, including Cash-in-Transit Insurance, Health Cover, and Life Insurance.
We are anticipating this Union budget will pave the way for the long-term sustainability of BC services by addressing systemic challenges and create an equitable operational model. Enhanced training and capacity building, with a focus on providing BCs with training in value-added services, such as selling financial products like insurance or mutual funds, to diversify their income streams. Soft skills training, particularly in customer-centric approaches, is equally crucial.”
